Content: Business Studies HSC Course

9.1 HSC topic 1: Business Management and Change

The nature of management • The importance of effective management o For the economy  Increase competitiveness of the economy  Job creation  Achieve worlds best practice o For individual businesses  Provide vision o Implement change  Coordinate activities within the business  Determines weather the business will be successful • Management roles Interpersonal o Involves relating to people within and outside the business o Figure Head – represents the public face of the business eg. Manager announces new campaign (Richard Branson) o Leader – manager motivates and directs their subordinates (staffing, training, maintaining, discipline) o Liaison – developing networks with people within and outside the business Informational o Monitoring – manager collects and understands information relating to internal/external environment o Disseminator – transferring information to subordinates within the business o Spokesperson – communicating the organisations plans, policies and results to the public Decisional o Entrepreneurial - able to coordinate the factors of production to improve the organisations performance o Disturbance Handler – able to deal with unexpected disturbances o Resource Allocatur – manager is responsible for allocating resources mainly human, monetary and physical. Involves setting budgets o Negotiators – responsible for acting on the businesses behalf in negotiating with suppliers, distributors and unions

Skills of management • People skills o Active Listening Skills – concerned with an active search for meaning in what a person is telling you eg making eye contact, asking questions

o Feedback skills – giving subordinates feedback on who well they are performing their job o Delegation Skills – giving the authority or responsibility to complete a task or activity to another person o Discipline skills – necessary to enforce business standards such as absenteeism, lateness and theft • Strategic Thinking o Concerned with thinking about the future of the business o Involves finding, choosing and implementing business activities that will make the business stronger and better in the future Vision o What the business wants to achieve in the future o Sets the direction of the business, purpose and character Flexibility and adaptability to change o Managers must be flexible and be able to adapt to changes in order to be successful Self –Management o Self managed groups where no leader is appointed o Members responsible for making sure the business achieves its goals Teamwork o There has to be effective teamwork between various functions of the business o Teamwork results in higher productivity Complex Problem solving o Follows this method:  Define the Problem > Generate alternative solutions > implement and follow up on the solution Decision Making o A choice made from two or more possibilities o Manager needs to follow processes in order to be successful Ethical and social Responsibility o Global trend towards social and ethical rights o Managers can employ people with high personal standards and ethics for the business

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Responsibility to stakeholders; reconciling conflicts of interest o Customers – provide customers with quality product and safe standards o Suppliers - pay balances and sales credit on time and be reliable o Government – Ethical competition and no collusion o Environment – ecological sustainable development • Reconciling Conflicts of interest

o There will be conflicts between different stakeholders because they will place a different emphasis on the business goals o Eg. Conflict between managers and employees relating to remuneration agreements and there will be aggressive arguments when these contracts are negotiated Understanding business organisations with reference to management theories • Classical-scientific – Management as planning, organising and controlling o Planning – Concerned with what the business is to achieve in the future and includes:  What the business is to achieve  How this will be done  Coordinating activities needed to achieve objective o Organizing – concerned with designing the structure or framework of a business includes:  Deciding what tasks are to be done  Who will carry out the tasks  How the tasks will be grouped o Controlling – measuring the actual performance with the planned performance  Involves managers deciding how to effectively measure what is happening in a business  What was actually happening to what was planned – Hierarchical organisational structure based on division of labour o Organizational structure – the formal way in which the business sets out how people will interact with each other o Chain of Command – the line of authority from the top of the business to the bottom o Span of control – the number of subordinates who report directly to the manager – Autocratic leadership style o Where managers use a high degree of direction and permit little or no participation in the decision making by subordinates • Behavioural o Organizational behaviour – the study of how people act in the work environment – Management as leading, motivating, communicating o The leading function of a business involves managers in directing people, motivating people, communicating and resolving conflict – Flat organisational structure, teams o Theorists argued that productivity would increase if the workers had a greater degree of accountability for their work o Teams – a group of people who work intensively together on a particular task to achieve a common goal

Clearly employees and low defined chain of morale. Encouragement of Negotiation/bargaining Sectional interests may override business interests. structure may lead to More open channels of lack of control. behavioural and political approaches Theory Strengths Weaknesses Classical/Scientific Matching skills to May lead to repetitive. transformation process. Lack of command leads to communication certainty of decisions between management and employees Behavioural Emphasis on rewards to Flat management motivate employees. communication Democratic decisions may be ineffective political Recognition of views of interest groups. management as negotiating and bargaining o Power – the ability of a person to influence the beliefs of actions of other people – Structure as coalitions o Working together to achieve common goals. tedious tasks for raise profitability.– Participative/democratic leadership style o Where managers encourage a high degree of employee participation in decision making as well as open communication channels • Political – uses of power and influence. but at the same time for different reasons – Stakeholder view o Various views of stakeholders have to be reconciled if a business wants to achieve its goals o Better to identify the strongly held views of many stakeholders than separate views of each stakeholder • Strengths and weaknesses of the classical. They  Recognised that systems involved inputs. Can encourage division and undermine leadership • Systems/contingency – adapting management and organisational approaches to circumstances o Systems theory – systems theorists recognised that a business should be seen as a system. workers abilities can boring. outputs and feedback  Saw the role of managers as coordinating all parts of the business so it can achieve its goals o Contingency Theory .

business ethics. consumer protection)  Managers have to be aware what each political party is proposing to do o Technology  Developments make machines and software more efficient and productive – Internal influences – sources of change that come from within the business . incorporation. Metropolitan areas  Moving to different country may encounter problems such as language. customs. what they make/sell.  Focuses on the idea that managers must make decisions according to the needs of a particular situation Recognises that there are many factors that can impact on a business and that one particular theory does not work in all situations Managing change • Nature and sources of change in business – External influences . ownership. licensing and taxation o Political  Views of different political parties have potential to create significant change for a business (Taxation.Things that cause the business to change that occur outside the business o Economic  economic environment has an important influence on business (during a recession there is difficulty in selling products) o Financial  Deregulation of the financial sector and the entry of foreign banks  Compulsory superannuation on businesses by adding to costs and pool of funds is source for growth o Geographical  Businesses target customers in certain areas eg. cessation. who they sell to. protection of consumers. currencies and high costs  Drought has impacted on production and employment o Social  Australians worried about environment  Ageing population  Changing role of women in society  Trend towards healthier lifestyle  Population becoming multicultural o Legal  Laws regulate businesses in relation to location. provision of credit. regulations.

having to adopt new ethics and values. owners – Unaware of changing environment.loss of status and power. ie. usually non-core activities. development of new relationships between workers o E-commerce  Greater use of the internet to buy or sell products  Still small percentage of total commerce o New Systems and procedures  Businesses need to adopt worlds best practice (doing things in the business at a standard achieved by the most competitive business in the industry the business is part of) o New Business Cultures  Shared values. redundancy payouts. retraining. reorganising plant layout – Inertia of managers. loss of career prospects/promotional opportunities managing change effectively – identifying the need for change Technology – updating equipment to maintain competitive advantage Products may be loosing their appeal as fashion evolves Return on investment is falling Community attitudes and expectations change Hierarchical structures may be unresponsive/slow to respond to customer needs Mergers or takeovers > new work cultures . acquiring new skills. employment relations. attitudes and beliefs of people in a business – Structural responses to Change o Changing conditions often require changes in the structure of the business and include:  Outsourcing • The partial contracting out of a business activity. changing cultures – Staffing — de-skilling. lack skills or leadership to implement change – Cultural incompatibility in mergers/takeovers . Accounting and finance.• • • • • • • • o The Effects of Accelerating Technology  The innovations in technology make it essential for a business to introduce new equipment – cost  Impacts on job design. marketing • Increasing trend in businesses in order for businesses to specialise in core activities and reduce costs  Flat Structures • Reducing levels of management giving greater responsibility to individuals in the organisation • Shorter chain of command and wider span of control • Enables businesses to adapt to change in environment easily Reasons for resistance to change – Financial costs — purchasing new equipment. training.

active or friendly. ect… Technology • Businesses have a social responsibility towards its work force which regards the rate of technological development and how its implemented • Accelerated technological development can be detrimental to the moral and productivity of the work force Globalisation • The move towards the situation where individual businesses compete in a global market . businesses could offer teamwork. and skills needed to ensure the changes behaviour continues Change and social responsibility Ecological Sustainability • The ability of current businesses to achieve their needs without compromising the ability of future businesses to meet their needs Quality Working Life • Important aspect of job satisfaction and affects productivity. self directed projects. participation and absenteeism • To create a working life that is enjoyable. flexible working hours. Lewin’s unfreeze/change/refreeze model • Unfreeze – managers explain why there is a need to change and try to gain acceptance for the need to change as widely as possible • Change implementation – change implemented into the workers behaviour or actions and they have to adopt new values or actions • Refreeze – consolidating these changes by providing support systems. resources.– setting achievable goals • It is necessary to set plans on how to achieve goals once the goals are identified • Successful change takes place in stages with objectives set for each stage – creating culture of change (encouraging teamwork approach using change agents) • Change Agents – the key group of influential people in a business who must be convinced to support change and who then manage the change process • Managers may need to: o Convince employees of the need to change o Get employees to agree with the nature of the changes that will happen o Give these people the power to implement the change effectively – Change models — force-field analysis.

human relations.Running businesses in different countries mean you have to accept different values and thus must be sensitive towards countries cultures Managing Cultural Diversity • Concerned with using the skills and talents of Australia’s multicultural workforce E-commerce • Buying and selling of products through the internet • Businesses operating with e-commerce have social responsibilities in terms of honesty. accuracy of information provided. and quality products. • HSC topic 2: Financial Planning and Management The role of financial planning • Strategic role of financial management • sets out the broad steps that need to be taken to achieve the businesses overall objectives • developed by top level management and concerned with a large timeframe of 3-5 years • effects marketing plan. operations • Objectives of financial management — • Liquidity – businesses ability to pay its short term debts as they fall due o Level of liquidity the business requires depends on its industry average and amount of cash tied up in stock and debtors . employment relations. confidentiality.

labour. ASIC o Creditors who wish to evaluate the businesses ability to pay debts .• • Profitability – return on the business that results from its activities o High levels attract investment into the business. Prepared for uses including: o Managers concerned with meeting requirements of regulations eg ASX. Reports include: o Profit/Loss statement o Balance sheet o Cash flow statement o Cost/Profit centre reports • Determining the financial elements of the business plan financial aspect of the business plan outlines and details how the strategies in the plan will be funded o Eg. machines and buildings o Business creates cash outlay in order to gain future economic benefits The planning cycle — • Assessing the present financial position – businesses will scan and analyse its reports in order to obtain an accurate picture of its present financial position. employees consider profitability when taking a job with a company • Efficiency – relationship between inputs and outputs o More output from input means higher efficiency • Growth – growth strategies attempt to increase the size of the business o Direct expansion – increase using existing resources o Merging – joining with a business producing similar products o Acquisition – purchasing other businesses providing similar products o Diversification – combining with or purchasing a business producing products unrelated to the business • Return on capital – profits made on investments in areas such as land. Operations manager may decide to achieve an increase on the return on investment by lowering costs through technology • Developing Budgets – formal statements of the financial resources set aside for carrying out specific activities in a given period of time o Useful financial tool for planning and controlling • Planning cash flows – this is a key aspect because a business may become insolvent if there is insufficient cash flow • Financial reports – summarise financial activities of a business during a particular period of time.

NAB. ANZ • Finance Companies o Gets funds by issuing debentures and borrowing from the general public o Provide short term to medium term funds to businesses • Insurance Companies o Issues contracts to provide a future payment if a particular event happens.o Owners who asses the businesses financial condition • Interpreting financial reports . Westpac. o By hedging a business transfers some of the risk to another business. For example. Banking dominated by CBA. insuring a building in case of fire Financial markets relevant to business financial needs • Major participants in financial markets • Banks o Largest lender of finance/most important o Ever increasing range of services o that enable managers to compare the actual financial performance of their business with the planned performance and include: o Budgets o financial statements o financial ratios • Minimising financial risks and losses – financial risk is the risk of not being able to repay a debt as it falls due which results in insolvency and potential failure of the business.people reading reports need knowledge of how the reports were compiled including the principles that underpin the recording of the transactions and the presentation • Maintaining record systems – managers need information from internal and external environments o Internal – managers need information for what is happening within the business to determine the successfulness of their plans o External – changes in the environment will create opportunities and threats to the business • Planning financial controls . Eg fire o Uses fees from contracts to invest in equity. debt and property • Merchant Banks o Get funds through short term borrowings o Lend mainly to corporations in such things as commercial bills and foreign currency • Superannuation funds .

• • o Get funds from savings of people preparing for retirement o Invests in equity. wheat and wool as a result of the Asian Crisis resulted in Australia receiving less for our commodities • Risk Management Securities – securities such as insurance lessen the risk for businesses. such as the change in personal income tax. This encourages economic growth. o Implication – businesses may have to change the type of security to fund their operations • Commodity Prices – lower prices for commodities such as coal. This gives investors confidence in the system Overseas and domestic market influences and trends in financial markets and their implications for business financial needs • Technological Developments – technological developments in communication has increased the speed of transactions in financial markets. This allows the business to manage its risk by transferring it to another business . When company floats • Secondary Market – where existing securities are bought and sold • The ASX has supervisory responsibilities to ensure companies and stock brokers comply with the regulations set by the ASX. creates wealth and generates employment • Primary Market – concerned with the formation of new securities.more opportunities to conduct financial transactions throughout the world • Taxation – changes to the taxation system. introduction of GST and reductions in rate of capital gains influence financial markets. Eg. o Implication – business has greater access to up=to-date information and faster transactions • Globalisation of financial markets – technological developments in communication has increased the opportunity to buy and sell securities on world markets o Implication . investors receive a return on each unit they have in their fund • Companies o Often have surplus funds from operations o Invest these funds on the money market. commercial bills and shares in other companies Role of the Australian Stock Exchange as a primary market • The ASX helps the flow of funds from investors to companies. debt and property • Mutual fund o Unit trust where small investments are combined and invest into large projects.

unconditional orders for a sum of money to be paid on a specific date in the future. it shows a level of commitment and conveys a belief that the business will become successful  Retained Earnings – money kept by the business after taxation and expenses are taken out and dividends issued. Source of funds for future business operations • External Advantages Disadvantages • If return on funds is • Risk of the company bigger than the interest rate being unable to repay the debt then the business gets to keep (insolvent) leads to the difference administration > receivership > liquidation • Interest paid on debt is treated as a tax deduction o Short term borrowings – debts that will be repaid within the year. The bank does this by substituting their credit rating for the customers credit rating o Long Term Borrowings – debts that will be repaid over a period longer than a year  Mortgage – charge over property that allows the lender to sell the property to recover the loan of the borrower is unable to pay. When an owner puts his own money into the business. Company rasing funds for a debenture is required to make a . Helps improve cash-flow  Bank Bills – these are bills of exchange. Management of funds • Sources of funds • Internal o Owners Equity – usually the first source of funds for a business. fixed term loan to a company from the general public. they are written. 20 – 30 years.• Accounting Standards – increase in the convergence of accounting standards and the development of high-quality global financial reporting standards • Share Ownership – increasing proportion in population who own shares due to the government privatisation program during the mid 1990s. Include overdrafts and bank bills  Overdraft – short-term loan agreement between a bank and a business that allows the businesses cheque account to go into deficit to a limit established in an agreement. Low interest rate because of the security  Debentures – fixed interest.

o Other sources of finance  Leasing – allows a business to use certain long term assets. Contract between to owner of the asset (lessor) and the business that wises to use the asset (lessee)  Factoring – where a business sells its accounts receivables to a factoring company at a discount. gearing/leverage Cost Interest paid to lender for borrowed amount Rate of return a company needs to achieve in order to maintain market value of shares Benefits Is tax deductible expense for the company. where business has set up the selling of shares but is no interest =costs. Funds are used to improve cash flow  Venture Capital – finance provided for new small businesses. or for expanding businesses that have management. product and processes that have been tested in the market place.• prospectus. It is best to match the terms and source of funds to the business purpose and structure o Matching terms and source to business structure – the business purpose is a key factor in determining the level of gearing  Businesses with predictable cash flow will be best funded with debts and thus will he highly geared  The amount of debts that is appropriate for a business will depend on how predictable cash flow is Comparison of debt and equity financing. takes time & split profit Finance Debt Equity • Gearing . cheaper to set up & often faster Retained earnings are a cheaper source of capital. • Financial considerations . risks. including costs and benefits. Businesses have to rely on equity finance  Grants – non-repayable financial benefits to a business. They are provided by governments. Loan secured by the companies’ property assets. able to raise large amounts Risks Not being able to pay rate as interest rates are high & may rise Under subscribed.most businesses use a mix of equity and debt finance. however large companies often issue grants.

Indicated difference between what you pay for your stock and what you sell it for “mark up”  Gross profit – expenses = net profit o Balance sheet – summary of the businesses financial position at a given point of time  Assets = liabilities = owners equity o The Accounting equation and relationships  Illustrates the relationship between the assets a business uses to conduct operations and the way assets have been financed  Current assets – short-term assets expected to be turned into cash within the year  Non-current assets – long-term assets that will provide economic benefits for a period longer than a year  Liabilities – debits owed to people of institutions other then the owner.o A measure of how reliant the business is on debt financing relative to equity financing o Highly geared means more reliant on debt financing relative to equity financing Using financial information – financial reports attempt to meet general interests of all its users. Each group of users need to develop skills to extract specific information from financial reports • The accounting framework – refers to the principles and standards used to prepare financial reports and present financial reports. Gearing ratio indicates the relationship between long-term funds and owners equity o Gearing ratio : Total debt/owners equity х 100/1 . the business has $2 to service this debt – Solvency • Indication of the long term stability of the business. A common accounting framework leads to:  Consistent and logical set of accounting standards  Allows comparison with international businesses – AASB similar to international rules o Revenue statements – provides a financial summary of the businesses operation results for the accounting period  Sales – COGS = gross profit  Gross profit – profit from trading before expenses. Delivered in Current/noncurrent liabilities • Types of financial ratios – Liquidity • Refers to the ability of owners to pay short term debts as they fall due o Current ratio : current assets/current liabilities  Ratio of 2:1 means that for every $1 of debt.

Can show trends in pos & neg aspects of the bus. the bus can work out where needs to improve. • With Similar Businesses o Ratios can evaluate the performance of the bus against similar bus in industry. the business generates a net profit of 5 cents o Return on owner’s equity – indicates how much the owners investment in the business is earning. – Profitability • Difference between profit and sales. • Against Common Standards o Using ratios to compare the bus against industry average can asses the relative performance of the bus. Refers to margin of ‘mark up’ between businesses purchasing and selling price o Net profit ratio : Net profit/sales x 100/1  A net profit of 5% means that for each dollar of sales. o Return on owners equity : net profit/owners equity x 100/1  A percentage of 20% indicates that every dollar of owners equity earns 20 cents – Efficiency • Measures and analyses the efficiency of various aspects of the business o Total operating expenses ratio : Operating expenses/net sales x 100. Often by comparing the bus to the best bus in the industry (benchmark). 40 cents is generated. Presented in a percentage. This may not • . o limitations of financial reports • Historical cost o this is the practice of valuing the businesses assets by their cost at the time the transaction took place. profitability & efficiency over a number of time periods. solvency. Helps managers determine how well each dollar of sales generates profit o Gross profit ratio : gross profit/sales x 100/1  A GPR of 40% means that for every dollar of sales.1  A reading of 30% means that every dollar of sales is taken up by 30 cents of expenses o Accounts receivable turnover ratio : Accounts receivable/average sales ÷ 360  A reading of 60 means that it takes an average of 60 days to collect an accounts receivable • Comparative ratio analysis • Over Time o Shows changes in bus liquidity. Anything below a benchmark of 60% is considered satisfactorily geared.

• reflect the true worth of the asset because assets appreciate and depreciate in value ant thus does not reflect the true worth of the business o a business applying historical principles in a period of inflation may report very different results from another business in the same industry that choose to use current pricing principles in the preparation of its reports. trademarks. Intangible assets o These are rights rather than objects and include patents. It is important to make sure businesses receive cash on time in order to use this cash for its operations. reputation which are called goodwill o these assets are not on the balance sheet and can only be purchased as a part of the business effective working capital (liquidity) management • the working capital ratio • working capital are assets that are used for the day to day operations of the business. The business needs to create a credit policy: o Term of the Credit o Credit limit o Discounts for each payment o Who is eligible for credit o Credit collection policy • Factoring – selling accounts receivable to a factoring company. Net working capital is the difference between the businesses current assets and current liabilities • current ratio : current assets/current liabilities • control of current assets • cash. Businesses need to have a good inventory control in order to minimise costs (JIT system) o cost of not carrying enough inventory  sales are lost  expensive machinery is idle o cost of carrying too much inventory . work in progress and finished goods. brand names and franchises. copyrights. Improves cash flow because debtors are instantly turned into cash • Inventory control – inventory includes raw materials. They also include things such as loyal employees.controlling cash requires a cash budget (detailed plan of cash inflows and outflows over a period of time) • Controlling receivables – accounts receivables arise when a business sells its assets on credit.

 expensive to store  stock can perish, lost or stolen  opportunity cost -> cash could be used else ware control of current liabilities • Payables – the effective control of payables requires bills to be paid when they are due. This also makes good business cense. Suppliers provide a better service to those who pay on time • Control of Loans – loans must be carefully controlled. The most effective way of controlling loans is through capital budgeting. This is concerned with assessing what sort of return can be gained from borrowing money to finance a particular project and what sort of risk is involved. • Control of overdrafts – this is concerned with minimising costs. Interests paid on overdrafts are operating costs. to control overdrafts, businesses can invest surplus cash into marketable securities so interest is earned.

strategies for managing working capital • Leasing – decisions to lease assets can reduce working capital because there is no ‘upfront cost’. This is only for the short term as leasing assets in the long term are generally more expensive than purchasing assets • Factoring – this improves working capital as money is not tied up whilst the business waits for debtors to pay • Sale and lease back -

effective financial planning • effective cash flow management – cash flow statements • Operating flows – the inflows/outflows of cash that are directly associated with making and selling the business products/services • Investment Flows – the inflows and outflows of cash associated with the sale of long-term assets • Financial flows – the inflow and outflow of cash associated with debt and equity financing transactions – management strategies • Distribution Payments – finds going out of the business to pay creditors. The management of these funds is concerned with matching debt with the cash inflows • Discounts for early payments – percentage deduction from the purchase price if the buyer pays within the specified time shorter than the credit period. • effective profitability management

• Concerned with the control of costs and revenues. Involves the measurement of actual costs and the comparison with planned costs and revenues – cost control – based on improving profitability by providing low cost quality goods and services. Ie “lean mean production machine” • Fixed and variable costs o Fixed costs are costs that are unaffected by the change of output o Variable costs are costs incurred in proportion to the output of a particular good or service. They can be reduced by  Reducing workforce and training workers to be multi tasked  Adopting JIT strategies to minimise cost of warehousing  Substituting variable costs for fixed costs such as industrial robots or computer controlled machinery • Cost Centres – unit within the business where managers are responsible for all costs associated with that unit. All costs are being controlled. • Expense minimisation – reduce expenses to the minimum possible such as by downsizing the workforce to proportion of output and therefore making wages and salaries a variable cost • Expense budgets – lists the main activities in a unit within the business and allocate a dollar amount to each activity – revenue controls • Sales objectives – set out in a sales or revenue budget. Managers then work out strategies to achieve budgeted figures. A revenue budget is a forecast of future sales • Sales Mix – refers to the mix of products a business offers for sale. There is a need to control the product mix by analysing the contribution margin or break even for each product. Enables sales staff to concentrate their marketing efforts on particular products • Pricing Policy – concerned with working out the price for each product that will protect or improve market share as well as meet profitability objectives ethical and legal aspects • Audited accounts – public and private businesses are legally required to have their accounts audited by independent auditors to establish their truth and fairness as owners, managers and shareholders need to be sure that the reports are valid • Inappropriate cut-off periods – the requirement of a business to report regularly means that cut-off periods have to occur. However, businesses may separate substantial revenues with costs to create a false profitability • Misuse of funds – prevention of misuse of funds need to be a part of a businesses corporate ethics policy. This should include development of effective internal control system to restrict the ability of people to misuse funds through:

o separation duties o computer password control o requirement of multiple signatures on cheques o cheques of inventory levels • ASIC – independent government body that enforces and administers corporations law and consumer protection law for investors, life and general insurance, superannuation and banking throughout Australia. Purpose is to reduce fraud and unfair practices • Corporate raiders and asset stripping o Corporate raiders was the name given to a group of entrepreneurs who use borrowed funds to purchase underperforming businesses o Asset stripping is the name given to the process of buying companies in order to sell, at market value, assets that are undervalued on the balance sheet

ore. (Roils Royce. o Marketing objectives dictate how the business functions operate (operations. Ferrari) • production–selling–marketing orientation • Production Orientation o Belief that if a business could produce a better quality product then consumers would naturally want to buy it (Henry Ford) o No focus on customers (1900-1920 • Sales Orientation o Belief that better advertising and marketing will attract consumers to purchase their product. crude oil) • Industrial Markets – where goods and services are sold to go into production of other products (Kraft buying jars for peanut butter) • Intermediate markets – businesses that buy finished goods for the purpose of reselling/renting them to consumers (Coles. A sales orientated business will only think of the consumer after the product is produced • Marketing Orientation o Customer focused . Dick Smith) • Consumer market – include individuals who buy and rent goods and services for personal use • Mass Market – market for goods and services that appeal to a vast majority of consumers (energy Australia) • Niche Markets – smaller markets for more specialised goods and services that only a few people are interested in or can afford. Accounting/finance.3 HSC topic 3: Marketing nature and role of markets and marketing • the role of marketing in the firm and in society • Firm o Marketing provides the link between the business and its customers. It also helps the business achieve its goals.9. employment relations) • Society o Increases materialism o Poor environmental impacts o Maximise consumer satisfaction o Increase our standard of living o Creates employment (30% of jobs marketing related) • types of markets • Resource Markets – primary markets involves with the extraction or raw materials that require no value adding to the process (iron. Woolworths.

The important aspect is the business life cycle (introduction. high quality products) o This is achieved with the help of TQM • Relationship Marketing o The process of developing a strong relationship with customers and suppliers o Loyal customers mean repeat sales and word of mouth advertising o Achieved through  Selling high quality products  Good service  Fair prices  After sales service • marketing planning process elements of a marketing plan • situational analysis including SWOT and product life cycle • This is a snapshot of the current situation the business finds itself in. post-maturity) o Competitor analysis – the aim of this is to predict the competitors likely future marketing strategies and how they may react to moves such as introductions of new products. it includes marketing analysis. o Market analysis – the business environment effects how successful the marketing plan will be. • the marketing concept The marketing concept emphasises focusing the business on understanding consumer needs and wants and offering products that meet those needs • Customer Orientation o Where the business centres its activities around the needs of the customer o Goal of the business is to build customer satisfaction into every aspect of the business (good value. The marketing plan should focus on identifying changes in the eternal environment and seeking opportunities or avoiding threats that these changes create. competitor analysis and SWOT analysis. External forces are forces that can affect the whole industry/economy. Internal influences such as the location of the business. the experience and skill of its employees and the business financial employees o Product Analysis – this examines the various issues relating to the goods and services the business provides.o Belief that customer needs and wants must be established and then business produces and markets the product in order to achieve business goals. price cuts or aggressive advertising . maturity. growth. product analysis.

capitalise on business strengths and minimise weaknesses • Marketing Mix strategies/tactics o Product – positioning of the product. They should satisfy the needs of the target markets. Mass market approach (water. gas. packaging strategies and product differentiation . • Mass customisation – businesses change a product that was normally mass marketed to suit individual needs developing marketing strategies • Marketing strategies are broad plans that outline how a business will achieve its objective.o SWOT analysis  Strengths – things the business does better than other businesses  Weaknesses – things other businesses do better than our business  Opportunities – that can arise from external environment  Threats – than can arise from the external environment • • • establishing market objectives • The marketing objectives will be derived from the business objectives. electricity) • Differentiated Marketing – business groups its customers according to characteristics such as age. meet the objectives of business and marketing plans. family size. The business designs a product for each group • Concentrated Marketing – where a business selects one part of a total market and focuses on that segment (Ferrari focuses on the wealthy) • Niche Marketing – where a business identifies a small segment in a market that is not being catered for and provides a product for it • Micromarketing – where a business caters for individual customers. income level. Objectives guide the business activities. They need to be: o Specific o Measurable o Achievable o Realistic o Timed identifying target market • Undifferentiated Marketing – when a business tries to provide a product for the whole market.

organisational structure and company culture into a cohesive program that supports the marketing plan • Developing a financial forecast o First step is to eliminate costs. monitoring and controlling • This is the process of turning plans into actions. of those of expertise. • Comparing actual with planned results o Managers can see weather their objectives are being reached and if not. distribution intensity implementation. discounts o Promotion – Personal selling. by individual sales representatives. loss leader. take action. public relations. o Sales analysis – breaks down the total sales to sales by product. below the line promotions. on how much they feel will be sold. Percentage share of the market o Marketing Profitability analysis – compares the cost of marketing with the profits of sales • Revising the marketing strategy o if the actual results of the sales analysis. direct marketing o Place – Distribution channels. by market segment. competition base pricing Pricing strategies – Market skimming. penetration.• o Price – Pricing methods – cost based pricing. market base pricing. by sales territory o Market share analysis – compares the businesses sales with that of its competitors. involves all actions that put the marketing plan to work • Successful marketing implementation depends on how well the business blends its people. then the marketing strategy must be revised . market share analysis and marketing profitability analysis do not meet the forecast results. advertising. these include:  Research costs  Product development costs  Product costs  Promotion costs  Distribution costs o Methods used to forecast revenue include  Sales force composite – using estimates of what individual sales people expect to sell to work out a total for the whole business  Buyer intentions – taking a survey of a group of consumers to measure how much of a particular product they will buy in a certain period of time  Executive judgement – using the opinions of the executives in the business.

packaging. They are involved in discussions and questions with an experienced researcher in order to identify feelings and attitudes . after sales service Price – prices reduced. discounts offered Promotion – change advertising media used Place – find new places to position outlets.    Product – new products. change distribution intensity market research process • determining information needs. data collection (primary and secondary). data analysis and interpretation • Market Research – an organises system of collecting and analysing information to help in making marketing decisions • Market research process involves: o Determining information needs o Data collection o Data analysis and interpretation • Determining Information needs o Firs step is to identify what information the business needs  Characteristics of the market  Success of promotional activities  Economic and business trends  Competing goods and services  Ethics of price changes  Success of new products  Market share o Exploratory research – clarifies the problem and searches for ways to address it o Descriptive research – used to measure and describe the markets potential for a product and the characteristics of a market o Casual research – used to test a hypothesis about a cause and effect relationship • Data collection o Primary data – original information specifically collected for the particular problem  Observational research – collected by watching peoples behaviour in certain situations  Focus Groups – involves a group of people selected because they match the characteristics of the target market.

internet • Government – ABS • Trade associations – retail traders association • Research firms – AC Nielson • Company reports Data analysis and interpretation o Data refers to raw facts and figures obtained from primary and secondary research. state and local government departments. o Information is data that has been analysed in order to make it useful. businesses are interested in the influence family members have on buying decisions. Eg. As well as households. It allows a business to test consumer to goods and services by testing responses to changes in a product  Surveys – where people are questioned in person. Survey results are entered into a computer which then produces tables and charts for analysis and presentation of important results  customer and buyer behaviour • types of customers • People and Households o A business needs to categorise its customers. they buy furniture. Eg. • government o this market is made up of federal. • Institutions o The institutional market is made up of Art galleries. nursery homes… . universities. multi-billion dollar military contracts.• Experimental research – attempts to prove cause and affect relationships between two things. The advantage is that as it already exists it is much easier to obtain than primary data  Sources of secondary data include: • Media – AFR. over the telephone or through questionnaires in the mail o Secondary data – information that is already collected. cars. museums. Different types of customers have different buying patterns • Firms and Business customers o people and households make up the consumer market. churches. prisons. As the family is the most important consumer buying organisation. Consumer market is individuals and households where as industrial market are businesses of different sizes.

organise and interpret information. In businesses. size) • Purchase decision – the consumer purchases the product. users are usually the one who buys the product. health. . newspaper. the buyer may not be the user as businesses employ people with the specific role to purchase resources. marketers need to be aware of this and create positive perceptions about their product. hunger) • Information Search – customer may start actively seeking more information from a variety of resources (internet. • Business Buying Process o Problem recognition o General need description o Product specification o Supplier search o Proposal solicitation o Supplier selection o Order-routine specification o Performance review • factors influencing customer • Psychological factors o Psychological factors are influences within an individual that affect his or her buying behaviour.  Lifestyle and personality – an individuals personality is the collection of behaviours and characteristics that make up the that person. As happy customers are valuable. pleasure. • Post purchase decision – after purchasing the product. safety. These may include taste. fear. As humans react more to perceptions rather than reality. These include:  Motivation – this is usually the reason the makes someone do something. amusement  Perceptions – how we receive.• the buying process • Need recognition – customer identifies problem (thirst. it is important for a business to be aware of customer satisfaction • Buyers and Users o In a consumer marker. friends) • Evaluation of alternatives – consumer evaluates alternatives according to what they see as important (sound system: sound quality. customers will either be satisfied or dissatisfied with the product. price.

Furniture)  Reference Groups – groups which a person identifies. sporting). spending ect. This will influence our behaviour as we may purchase products in order to fit in to these groups • Economic Factors o Business – effects businesses ability to produce and compete  Boom. education  Family – most buying decisions are family decisions because most members are likely to share the good/service (TV. religion)  Socio-economic status – division of society based on income. occupation. beliefs and patterns of behaviour. customs. gander. These things influence our perceptions on life and thus will influence our buying behaviour (fitness.)  Monetary Policy – RBA (Interest rates)  Government Policy – Gun Laws. Recession. Gov. developing marketing strategies • market segmentation and product/service differentiation • Market Segmentation is the process of breaking the total market into smaller parts based on similar characteristics . Animals. Alcohol/tobacco tax. This can be done through:  Fiscal Policy – budgeting (taxation. Consumers attitudes towards products determines its success  Culture – societies values. sport)  Subculture – subset of people with shared values and beliefs within a culture (age. Recovery o Customers – economic situation effects consumers:  Level of income  Level of savings  Consumer confidence  Ability and willingness to borrow o Disposable income – income after tax is deducted o Discretionary income – anything left of disposable income after spending on necessities such as food. clothing and housing • Government Factors o Governments use a number of economic policy measures to expand or contract the level of economic activity. (friends.Lifestyle and personality will thus determine what we buy  Attitudes – an individuals overall attitude towards something.

Pepsi. gender. hence businesses may target wealthy customers with expensive luxury cars such and Bentley. Designer Clothes)  Usage rate – customers can be grouped as light. Porsche. Other consumers may switch depending on how they . (magazines target car. gardening enthusiasts) o Behavioural Segmentation – dividing a market up into groups based on attitudes and responses to a product  Purchase occasion – different products are purchased at different times of the day or year (winter clothes. (Department store vs. hence businesses alter products or use different promotional techniques for different age/lifestyle groups  Gender – Businesses appeal to different genders by targeting them with more specific needs and wants. income and education  Lifestyle – individual’s hobbies. breakfast cereal)  Benefits sought – customers purchase products as they think it will give them some sort of status or prestige. or for quality and reliability (Luxury Cars. Ford). o Psychographic Segmentation – segments customers on personality. boating. Easter eggs. family size. careers. Safety and versatility will appeal more to women)  Income – what you ear determines what you can afford to purchase. education  Age/Lifestyle stage – your needs alter with age. income. Holden vs. Ferrari. medium or heavy users of products. individual)  User loyalty – consumers develop a loyalty to a particular product (Coke vs. interests and activities. Heavy users will purchase a large proportion of sales as opposed to light users. (people who live near ski fields will generally buy more ski equipment than those who live in the desert) o Demographic segmentation – segmenting groups into variables such as age.• • Target market is the group of customers at which the business focuses its marketing program Ways of segmenting the market o Geographical segmentation – segmenting groups according to Geographic characteristics. (a car with a big powerful V8 engine will appeal to men. (cool products for teenagers)  Socio Economic status – occupation.

This involves making your product stand out from the rest o Ways to differentiate your product  Offer a wide variety of models (Ford has 4WD. Compact. reliable delivery. Relationship marketing aims to develop this cense of customer loyalty Product/Service differentiation .• feel at the time of purchase. Businesses think products on three levels o Core product – the problem solving service and benefits you get when you buy the core benefits o Actual product – parts and features of the product that provides the benefits o Augmented product – combination of core and actual product • Positioning – process of creating the image that the product holds in the mind of consumers relative to competing products o Positioning strategies – a business positions its products in a number of ways  Position by Benefit – product benefits can be used by a feature of the product  Positioning by price or quantity – exclusive products can be positioned in exclusive stores or mass quantitated in supermarkets . Van ect. friendly service Marketing Mix       • Product Quality Features Warranty Variety Size  Place  Distribution channels  Physical distribution  Promotion  Personal selling  Advertising  Public Relations     Price List price Discounts Credit terms product and service • Refers to physical goods as well as services.)  Differentiate according to the performance of your product  Differentiate according to style and design  Differentiate according to reliability and durability  Providing: after-sales service.

(entrusted brand implies good quality and value for money) o Brand Strategies  Generic brand strategy – uses non-brand name for a low cost product (no frills. The cost of production sets the price . Increased by brand awareness. and at the same time providing a reasonable profit • Pricing Methods o Cost Based Pricing  cost plus pricing – prices are based on the costs of production with a set mark. home brand)  Individual brand strategy – special name for each individual product (Unilever has individual names for its products such as Dove. Panasonic)  Manufacturers brand strategy – naming the brand after the name of the manufacturers (Country Road)  Private brand strategy – resellers place their own names on products (Sony placing their names on Energiser batteries)  Hybrid brand strategy – combination or two or more strategies (country road used manufacturers brand strategy and also sells their product to other companies who put their own label on the country road clothes) o Brand Equity – refers to the value of the brand. Rexona. Pears )  Family brand strategy – single name covers a whole group of products by one business (Sony. loyalty and association Packaging – serves a number of uses in marketing o Protects product on transportation o Informs the consumer about the use of the product o Promotes the product and differentiates it from competitors o Protects against misuse or tampering of the product  • Price • Businesses are required to assign a price that is attractive to customers. Eg.• • Positioned by direct comparison – products can be positioned next to competitors to give the image one is better than the other (Coke against Pepsi)  Position by usage occasion or users – products are positioned on how much they are used (batteries are used a lot. 25%. Lux. hence they are positioned in checkout isles) Brand – distinguished name/symbol which identifies products and differentiates them from competitors. no-name.

$30) o Discounts  Quantity Discount – reduces amount as more of the one product is purchased  Seasonal discount – out of season products are made less expensive in order to make way for next years seasonal gear (ski-equipment)  . This ignores the amount customers are willing pay o Market based pricing – price set by level of demand and supply within the economy. Does not reflect the cost of production (property boom) o Competition based pricing – price of competitors products is used as a guide to set prices of products  Leader follower pricing – smaller businesses will follow decisions made by larger businesses who own a larger share of the market  Going-rate pricing – businesses set its prices similar to that or their customers  Discount or premium pricing – positions a product in relation to differences with its competitors  Sealed-bid pricing – occurs where businesses have to put in a tender for the job. a high price can be charged in order for the business to get as much profit as possible to meet research costs. This is to attract customers into the shop so they may purchase other goods o Price Points – products within industries are priced on quality and popularity (CD’s are priced at $15.• • Break even pricing – setting a price that will cause a business to break even. until competition enters o Penetration Pricing – businesses set their price below their competitors in order to gain market share by making their product more attractive o Loss Leaders – products are priced below cost of production in order to attract customers. $20. it will set a price higher than its competitors o External Factors – a low level of demand will force a business to lower its prices to increase sales Pricing Strategies and Tactics o Market skimming – when a new product enters the market. Business sets its price on what it thinks its business is doing (buying contracts) o Value Based Pricing – sets prices based on buyer perceptions of value rather than sellers costs Factors to consider when setting price o Internal Factors – if a business is aiming for profit maximisation.

Radio. but it is expensive. Magazines and Internet. Advantageous in developing customer-business relations. persuade and remind customers • Elements of the promotion mix o Personal Selling – where a sales person directly approaches or interacts with a customer. impersonal and sometimes avoided by consumers o Below the line promotions – these promotional activities are not main stream advertising activities. Main mediums include TV.• Cash Discounts – Discounts offered for cash payments as credit payments are more expensive for the business • Price and Quality interaction – studies have shown people use price as a guide to quality of a product. how it will be said. promotion • Part of the marketing mix that a business uses to inform. Include contests. o Advertising – conveys messages to consumers through mass media. It allows consumers needs. coupons. but is expensive to hire and train employees. free samples and point of purchase displays o Public Relations – involves publicity (often unpaid) about a business or its products (reviews in magazines or newspapers) • Communication Process – important for businesses to understand the communication process so that messages can sent out as best as possible. Advantageous in reaching a large number of people and for the message to be repeated a number of times. Newspapers. who will say it and when and where the message will be delivered o Determining the response sought – Awareness > Knowledge > Deference > Conviction > Purchase  . Billboards. The communication process includes o Senders o Encoding o Message o Media o Decoding o Receiver o Response o Feedback o Noise/interference • Steps in developing effective communication o Identifying the target audience – this will determine what is said. uncertainties and questions to be answered. educate.

which removes cost • Distribution intensity – number of locations through which a business sells its products o Intensive distribution – product available at every possible location (coke) o Selective distribution – where a manufacturer wants to widely distribute its product. but may sell it through upper market stores such as David Jones or Surfection) . hold their interest and raise their desire about the product. (Ripcurl will not sell their product through cheap department stores such as Target. This process starts with the producer and ends with the consumer • Distribution channels – business or group of business involved in moving goods from the manufacturer to the point of final use. the business needs to research whether it has worked or not.o Choosing a message – An effective message should grab the attention of consumers. and then get action o Choosing Media  Personal Communication channels  Word or mouth  Non-personal communication channels  Opinion leaders o Collecting Feedback – once the message has been sent out. This can be done by surveying the target audience • place/distribution • Place refers to the distribution of the product. but does not want to use intensive distribution. o Intermediaries are used because:  Ensure efficiency of distribution  They match supply and demand by providing customers with a variety of products from different producers  Reduce contact lines between manufacturers and customers. Common distribution channels include: o Manufacturer > Consumer o Manufacturer > Wholesaler > Consumer o Manufacturer > Retailer > Consumer o Manufacturer > Wholesaler > Retailer > Consumer o Manufacturer > Agent > Retailer > consumer o Manufacturer > Agent > Wholesaler > Retailer > Consumer • Reasons for intermediaries – intermediaries are independently owned businesses that move products from producers to find users.

and the size of the sign outside their business. ethical and legal aspects • environmentally responsible products • other issues including creation of needs. or have one large warehouse to reduce costs. Ensures products are delivered quickly and safely to customers. The type of transportation will depends on what type of product it is. impacts of retail developments. o Order processing – involves all activities used to handle and fill sales orders o Warehousing – the storing of goods while they wait to be moved onto another area or be sold. Businesses need to decide weather to have lots or small warehouses to improve distribution efficiency. where it needs to go. how quickly it needs to be delivered.• o Exclusive distribution – limits supply of products to particular stores or outlets (Bentley’s sold only to exclusive car dealers) • Physical distribution issues – physical distribution involves all the activities involved in moving products from the manufacturing point to the final consumer. land. o Materials handling – deals with the equipment used to physically handle the products (forklifts. conveyor systems. sugging (selling under the guise of research) • role of consumer laws in dealing with – deceptive and misleading advertising . It also regulates what sort of business activities are allowed to be undertaken. trucks). environmental effects on distribution • Technology o Technology has changed the way people shop and has thus affected marketing as businesses are required to adopt their marketing strategies to adopt this change. industrial. o Transportation – movement of products by air. sea. hours of operation. having too little will loose sales. Having too much stock is expensive and it may perish or be stolen. commercial). o Inventory control – overseas the quantity of product that is available for sale at any given point in time. (internet has enabled businesses to market and make sales easier and more efficiently) • Local Government o Local government regulations such as zoning regulate the positioning of businesses to certain zones (residential.

– – – – price discrimination implied conditions warranties resale price maintenance. .

WRA (1996) rests workplace issues with the employer at the enterprise level. improving quality working life. Responsible for wages and working conditions. Employees pay membership fees in return for services such as: • Legal representation in an industrial dispute • A collective voice • Improvement in working conditions • Increase in pay There has been a deterioration in the participation of union membership in the past 20 years. Mainly concerned with wages and working conditions. This is due to: • Shift in employment from public to private sector . Shift towards employers viewing employees as valuable assets as a better employee will give the business a competitive advantage. o Employees – people who are paid to work for employer. Emphasis on providing employer training. improving physical working environment. MTIA) • Representing members in negotiations with unions • Appearing before industrial tribunals • Participating in enterprise bargaining o Unions – represent employees in the workplace. It is a strategic function including: o Planning the needs o Acquiring people with the right skills o Developing and training employees o Performance management o Maintaining staff with the right rewards o Dealing with conflict o Working within the legal framework and developing relationships • stakeholders in the employment relations process o Employers – business owners and managers.4 HSC topic 4: Employment Relations the nature of employment relations • Employment relation is the function that deals with the relationship between employers and employees. BCA. Employees seek: • Increased wages • Improved working conditions • Challenging work • Autonomy • Family friendly working conditions o Employer associations – associations that represent the employer members. which can cause conflict with employers. Employers pay membership fees in return for services such as: (AIG.9.

representation rights. handles breaches of agreements. amalgamation. cancellation. mainly for small business. • Office of Employment Advocate – provides advice and assistance to employees and employers. approve workplace agreements. Their job includes: • Collecting membership fees • Recruiting members • Looking for breaches in awards or working conditions • managing the employment relations function • Unions also employ industry officials or organisers who move between workplaces carrying out union business o Government organisations – the federal government is empowered to make laws with respect to coalition and arbitration for the preservation and settlement of industrial disputes extending beyond any one state. Their tasks include: o Motivating staff o Discipline o Managing conflict o Staffing o Training and development key influences on employment relations • social influences • Increasing amount of females in the workplace • Growth in part-time work • Shift from manufacturing to services industry • • • .• Shift from blue collar to white collar sector Shift from manufacturing to services industries Shift from full time to part time work Union representatives in the workplace are called shop stewards. (AIRC. • Federal Court of Australia – applications concerning the interpretation of awards or certified agreements. OEA) • AIRC – prevents and settle industrial disputes by conciliation. FCA. Deals with matters concerning organisations. penalties for breaches of awards and orders of the commission. ensures a safety net for minimum wages and conditions for employees. publish decisions. • Australian Industrial Registry – keeps register of organisations. Managing the employment relations function o Line management and specialist – a line manager is a person in charge of other employees who work together in production of goods and services. orders and awards of the commission. particularly registration.

however. Globalisation means Australian products must compete worldwide resulting in the need for worlds best practice in terms of employment relations. without day to day supervision economic influences • The state of the economy and the increase in globalisation have a significant impact on employment relations o Globalisation – globalisation refers to the operation of businesses in many countries. religion or colour new organisational behavioural • Flat management and team structures . effective employment relations • role of employment relations • Employment relations function is to manage the relationship between the employer and employee effectively in order to develop competent. The laws and regulations that govern the employment relationship are common. marital status and pregnancy o Racial discrimination act – outlaws discrimination on the basis of race. Teams are a group of workers who are given the responsibility for a particular task within the business. There is no need for middle layer management and employees are empowered to mage certain work related decisions. . the owner may undertake this task.with Flat Management structures. In small businesses. flexible. and productive employees.• • • • Increase in the use of contract work • Decline in availability of unskilled work • Growing division between skilled and unskilled workers • More diverse workforce • Mobility of workforce legal influences • Australian workplaces are highly regulated compared to other countries. large businesses may have specialist managers or departments. numerous and constantly changing o WRA (1996) – aims to encourage enterprise bargaining and discourage intervention by other parties (unions) in settling disputes o Enterprise bargaining – process where employers and employees negotiate the terms and conditions of employment for their workplace o Sex Discrimination Act – outlaws the discrimination on the basis of sex. workers have direct contact with top level management. One result of this is an increasingly mobile workforce. Most businesses incorporate employment relations in their strategic plans directly involving human resource managers in the long term business plan.

• communications systems Communication within the business is a key issue for effective employment relations. Some benefits of team briefings include: o Reinforces management o Prevents misunderstanding o Helps people accept change o Improves upward communication • rewards • Financial – usually in the form of wage or salary increases. An employees pay can be determined by: o Awards – legally enforceable documents made by the industrial tribunal and set the minimum wage for an industry . Typical methods of communication between managers and employees are: • Daily walk around by management • Regular meetings • Email • Notice Boards. newsletters • Formal meetings • Social functions • Grievance procedures – • Dispute • Meeting between workers and supervisors • Meeting between workers and higher management • Conciliation involving disputing parties and IRC commissioner • Formal hearing of the dispute • Final decision made by IRC which is legally binding • Worker Participation – involves workers along with their managers making decisions about matters that affect them in the workplace (eg. pay conditions. share ownership schemes or general pay increases. OH/S. Common approaches to improve worker participation include: o Joint-consultative committee o Self managing work teams o Quality circles o Employee representatives board o Profit sharing schemes • Team Briefing – meeting between managers and a team of workers where discussion takes place. New technology. Job design. commissions and bonuses. discipline).

temporary or permanent basis o Parental leave – time taken off work in order to take care of children in their first year after birth. new management. Hospitals o Career breaks – employee arranges a fixed period away from work to undertake study or take care of family commitments. o Personal Careers leave – employers. standards and expectations and will: o Reduce initial anxiety of new employees o Enable relations with existing employees o Reinforce the attitudes that the organisation values o Develop positive perceptions about the organisation o Help understand the organisations procedures and practices flexible working conditions • Family Friendly programs o Permanent part-time work – worker works less than a full working day. part time. involves employees working away from work on a full-time.• • • o Enterprise Agreement – Agreements made between the employer and the employees at a particular enterprise or business o Over-award payment – payments to employees that are above award. measures of effectiveness . This arrangement is commonly found in Australia in teaching. week. long day care and family day care. law. under federal awards. colleagues. new ethos. A comprehensive induction will help workers adapt to a new environment. enables employees to reward staff o Individual contract – employment contract between employer and employee setting out pay and working conditions o Performance-related pay schemes – some of the employees remuneration is based on the performance of the individual or the workgroup which they belong training and development • Induction – training given to new employees when they start their employment. Various schemes include school-holiday. vacation care. are allowed to use a combination of sick and bereavement leave to care for sick family members o Childcare – two main issues include cost and availability of childcare. sick leave) o Job Sharing – arrangement allowing two people to share one full time job. with a guaranteed job upon return o Home-Based Work – known as teleworking or telecommuting. month or year. This includes information about specific companies and work rates. but entails the same entitlements as full time workers (eg.

recruitment.. This can be in the form of: o Involuntary separation – eg dismissal. the quality of work will suffer. Employment relations can be benchmarked against Aust. which creates rights and obligations for both parties that are enforceable by law. awards and agreements • the employment contract an individual contract of employment is an agreement between an employer and employee. and poor job satisfaction. Without cooperation of employers and employees. • Benchmarking – Benchmarking is a measure of business performance compared with the best achievements of similar organisations around the world. statute law. who are away from work on sick leave without being approved at advance.Levels of staff turnover – refers to the rate at which employees leave the business. legal framework of employment Employment relations is highly regulated by law. Practices or worlds best practice. retrenchment o Voluntary separation – eg resignation and retirement High levels of staff turnover can indicate to managers that employees are not satisfied with the working conditions in the workplace o High levels of staff turnover is costly (training. • Contract of service – employer/employee relationship where the employee must perform tasks under the control and direction of the manager • Contract for service – relationship between employer/individual contractor where the contractor controls how the task is done. loss of experience/culture) o Some staff turnover is healthy (fresh ideas. It is costly as it lowers job satisfaction • Disputation – industrial disputes often involve the withdrawal form work by employees who are unhappy about an issue (Strike. improving employment relations. low morale. wider experience) • Absenteeism – absenteeism is the percentage of employees on an average day. what materials will be used ect. Benchmarking and quality circles are various practices the improve quality and involves employees in decision making. The main areas include common law. • Quality – the level of quality is a good indication about the level of effectiveness of employment relations. team briefings. stop work meeting). Work groups. TQM. Employee Law requires employees to provide compensation coverage Contractors Expected to provide own coverage through private insurance • Workers Compensation . High levels of absenteeism are an indication of poor employment relations.

competence. fringe benefits tax. safe system of work. and PAYE tax deductions for employees Leave Entitlements Entitled to statutory or Self-employed and award leave entitlements must make allowances that are made up of for the various leave annual leave plus loadings loading. long service leave. statutory holidays and a set number of days for illness • Duties of employers/rights and obligations o Employers have certain obligations under common law including:  Duty of care – obligation to take reasonable care for the safety of employees by providing safe equipment. compulsory own taxes superannuation entitlements. and care – employees have a duty to use care and skill under the OH&S legislation  Duty of good faith and confidentiality – employees must not give out private information or . warning employees of risk and training employees thoroughly  Duty to pay remuneration – employers must pay correct wages as set in awards and agreements and reimburse employees for expenses  Duty to provide work – employers must provide work except in casual employment contracts. reasonable and safe standards – employees must follow all lawful and reasonably commands of their employers and comply with award agreements  Duty to work with skill.  Right to dismiss – employers have the right to dismiss any worker on the spot in particular situations where employees have failed to: • obey lawful instructions • perform duties over a period of time • perform duties with necessary safety • meet conditions of the employment contract • Duties of employees o Employees have certain obligations to:  Duty to obey employers lawful.Tax Employer liable for Expected to arrange payroll tax.

. AWAs have no role for unions or other third parties. There is no promise to provide work or to be available for work on other occasions. • Regulating the relationship between employer/employee o Statutes – there are numerous pieces of legislation that are designed to regulate the relationship between employers and employees (1996 WRA) o Awards – legal documents made by industrial tribunals that set the minimum wages and working conditions that must be provided to employees. They can be collective (certified agreement) or individual (AWA) o AWA’s – individual agreements between employees and employers about terms and conditions of employment. The WRA 1996 has set the awards to 20 allowable matters. o Agreements – agreements between employers and employees can be formal or informal  Informal Agreements: agreements that are not registered by an authority or tribunal. Informal agreements can not undercur awards or formal agreements  Formal Agreements – written agreements made under legislation and are registered under the AIRC.• trade secrets which is private property and must account for all money/materials received or lost  Duty to disclose information relevant to the employer – the employee must disclose information requested by the employer is specifically asked and of directly relevant tot the employment activities. Certified agreements are generally for:  small businesses  geographically distinct part of a business  organised unit within a business types of employment contract • Permanent and part time – the number of hours worked per week will determine the type of employment. Both full and part time workers have an arrangement of contract to work specified hours per week • Casual employment contract – casual employees are employed for short term irregular or seasonal work. Casual employees are paid above the award as a result of not having access to annual or sick leave. further legislation will simplify this to sixteen. They must be approved by the employment advocate who apply a no disadvantage test o Certified agreement – an agreement made between an employer and an group of employees or between an employer and a union representing employees.

Industrial disputes are a result from disputes concerning wages. • Traditionalist view – views conflict as bad and would always have a negative impact on an organisation (associated with violence. and chefs. first aid services. These include conscription.Fixed term employment contracts – fixed term employees are often employed for a specific project or to replace employees who are absent on long service leave. poor equipment o Management policy – caused by:  Terms and conditions of employment  New awards and agreements  Discipline matters  Disagreement with managerial decisions o Political goals and social issues – unions have become more involved in political and social issues. They are not covered by federal legislation • Apprenticeships and traineeships – agreements between employers and trainees/apprentices for training and employment. State legislation requires the employer does not employ anyone under 21 unless they are an apprentice or have completed an apprenticeship. working conditions. rainforest conservation. They are educated in on-the-job and off-the-job in structured training and are guaranteed work at the end. fitters. • Tradespeople – include motor mechanics. hairdressers. This imbalance is believed to be so great that employees believe they have to overthrow their employers. o Wage demands – demand by employees for an increase in wage rates o Working Conditions – include protective clothing. Managers need to develop an effective system of communication that allows employees to express their views and resolve them • Radical view – focuses on the imbalance of power between employers and employees. industrial conflict • definition and causes • Industrial conflict is defined by the ABS as withdrawal from work by a group of employees or a refusal by employer to allow them to work. as a result they will not share the same views. destruction) • . • perspectives on conflict • Unitary view – assumes all employees within a business share goals of the business as defined by senior management • Pluralist view – pluralists are made up of many parts and have many stakeholders. uncomfortable working conditions. urban development. leave and managerial policy.

They provide information to their members and often this is enough to enable a dispute to be resolved at the workplace level • • Main role of the AIRC . providing the framework and the rules which workers and management negotiate.• • Human Relations View – believed conflict was natural and unavoidable occurrence in all organisations and it sometimes may benefit the organisation • Interactionist view – view encourages conflict on the grounds that a harmonious. peaceful. The federal government acts as a reference and a judge in disputes. Australia’s industrial relations system has encouraged growth in unions and employer associations. The centre of most industrial relations disputes is usually a grievance: o Small business – grievance are negotiated directly between employer and employee o Medium business – grievance are represented by human resource managed o Large organisation – usually a full time human resource manager and department and industrial relations specialist • Employer Association – represents individual employee who are their members. tranquil and cooperative organisation is likely to become static and non-responsive to the need for change in an organisation types of industrial action – overt o Lockout – action taken by employers where employees are not allowed to enter the workplace o Pickets .Striking workers gather outside and do not allow anyone to enter the workplace o Strikes – where employees withdrawal their labour (most common form) o Ban – where employers refuse to take certain action o Work to Rule – where employees work to the strict letter of their award or agreement and refuse to do anything else – covert o Absenteeism – dissatisfied workers mar take more sick days as a form of industrial action o Sabotage – deliberate damage/vandalism to company property o Labour turnover – some employees may leave the workplace if they are dissatisfied with their work o Exclusion from decision making in business – conflict can arise if employees believe they have not had their fair say roles of stakeholders in resolving disputes • The main stakeholders in disputes are employers and employees.

costs and benefits of industrial conflict • Financial Cost – significant financial costs are associated with loss of production due to industrial action. . Prolonged disputes can force businesses to close due to financial reasons. • Social Costs – tension and dissatisfaction in the workplace could be expressed at home resulting in family breakdown and domestic violence. • International Cost – industrial conflict could result in loss of market share because the business and the supplier could be seen as being an unreliable supplier (waterfront dispute) • Benefits o Provides opportunities for employees to express satisfaction o New way of doing things (changes in production techniques) o Productivity can be increased through changes in management o New communications lines opened between employer/employee o Health and safety issues discussed. If it involves unions it is called collective bargaining.• • o Facilitate agreement making between employers and employees about wages and conditions of employment o Prevent and settle industrial disputes. Anti-strike and anti-employer sentiment could create social unrest. businessmen or any other mutually acceptable person • Conciliation – form of mediation in front of an industrial tribunal • Arbitration – process that occurs when an industrial tribunal evaluates the arguments of both parties and comes to a decision which is legally binding • Common Law Action – occurs where there is no state or federal legislation governing a particular matter. Other financial costs include legal costs. The mediator could be a politician. vandalism and theft. This may include o Breach in duty of care o Vicarious liability o Breach of contract • Business/division closure – if a dispute is impossible to resolve it may result in the closure of the business or division altogether. as far as possible by conciliation and at last resort by arbitration dispute resolution processes • Grievance Procedures – formal series of steps which are meant to be followed when a dispute arises • Negotiation – involves discussion between the parties concerned to try to mutually resolve a dispute. absenteeism. deliberate accidents. Resolution can be in the form of AWA or CA • Mediation – a voluntary negotiation process where a neutral third person assists the parties to try and find a way to resolve conflict.

race and religious belief. disability. Workers compensation provides regular income and medical expenses as a result of their injuries.ethical and legal aspects • issues in the workplace • Working Conditions – working conditions are a key issue in relations between employees and employers. ensuring that everyone has a ‘fair go’. o Management must be aware of such legislation when making decisions regarding employees (not to be discriminatory) • Unfair Dismissal o Industrial Relations Act (1996 – NSW) o Prevents unfair dismissal of employees – ‘harsh. employees must dismiss employees in writing. Workers compensation covers: o Physical injuries o Disease o Psychological injuries o Injury due to travel • Anti-Discrimination o Anti-Discrimination Act (1977) o Discourages anti-discriminatory behaviour in the workplace.workers compensation laws provide payment for workers if they are injured as a result from their work. o Management must be aware of such legislation when making decisions regarding employees (not to be discriminatory) • Equal Employment Opportunity o Human Rights and Equal Opportunity Commission Act (1986 – NSW) o Aims to reduce discrimination in the areas of sex. unreasonable or unjust’  Employers must give employees a warning of dismissal and time to improve  If they have not improved. They include: o Hours o Job design o Employment contract o OH&S o Leave o Employee consultation o Management style o Physical working conditions • OH&S – about protecting people in the workforce. employees and contractors • Workers Compensation . These people include employers. and given 2 weeks notice (if the ..

business wants them to leave at that moment. . they must pay 2 weeks salary).

(price rises in commodities may have impacts on prices of goods in another country) • Company Level – globalisation refers to the way businesses can expand sales and assets across countries. NAFTA. but also given consumers a wider choice of goods and services to choose from • trends in global trade since World War II . • Growth of the global economy – globalisation has increased due to improvements an communication and transport technologies.9.5 HSC topic 5: Global Business globalisation • nature and trends • World Wide Level – globalisation is the growing economic interdependence between countries. culture). CERTA) o Changes in consumer markets – consumer mkts have changed due to:  Product standardisation by TNCs (McDonalds. The world has become a single market as a result where cross border trade in goods and services and capital is increasing • Specific country level – globalisation refers to the link between countries economy and the rest of the world. MTV)  Use of e-commerce has allowed consumers to buy products from around the world  Reduction of trade barriers have not only reduced prices. Subway. liberation of trade policies and through the activities of TNCs • Changes in Markets o Changes in financial/capital markets – one of the major driving forces of globalisation is the development of Global Financial Markets  International equity market – made up of all bonds bought and sold outside the issuers home country  International bong market – market of all bonds bought and sold outside the issuers country  Foreign exchange market – the market for the exchange of all foreign currencies o Changes in Labour markets – Labour markets have become more globalised despite barriers to entry to foreign countries (immigration. Companies can now obtain labour and capital from foreign countries. This has occurred due to:  TNCs accessing foreign markets by locating in different countries  Creation of trading blocs (EU. language.

The WTO has been introduced to manage this trend. Increase in telecommunications has allowed cultures and values of different countries to influence each other. Improvements include: o Cheaper air transport and shipping (containerisation) o Improvement in telecommunications o E-mail o E-commerce • The role of government – governments have contributed to the growth of globalisation through: o Trade agreements – over the past 50 years trade agreements between countries has reduces barriers to trade (tariffs. TNCs have key resources and activities spread around the globe. • Deregulation of financial markets – over the last 30 years governments have moved or relaxed regulations regarding their financial sector. in 1953 this was only $53 billion • drivers of globalisation • Role of TNC – the increased activities in TNCs have increased the integration of national economies o Multinational – involves foreign subsidiaries that act independently each with full production facilities in the countries in which the operate o Global Strategies – comprises a parent country and subsidiaries which are part of the integrated production chain o TNC – combination of multinational and global strategies. This has allowed TNC to take advantage through large scale production and marketing • Impact of technology – improvements in technology has contributed to the growth of globalisation. NAFTA. • Impact of Global Consumers – there has been a growing similarity between global consumer tastes and preferences around the world. As a result: . EU. the decline of the communist regimes in Russia have opened up more countries to free trade.7% o 2000 – total exports of goods and services values at $7. Resources integrated into an interdependent network of world-wide operations. financial flows between countries. CERTA are trading blocs that contribute to the liberalisation of trade o Political changes – in particular. quotas). subsidiaries. o 1991 > 2000 volume of trade in goods and services rose by 6.• Over the past 50 years there has been a tremendous growth in the volume of goods and services trade.3 trillion.

availability of labour. Types of FDI include: o Wholly owned Subsidiary is where a business is owned and controlled by a parent company o Joint Venture separate business created an jointly owned by two or more separate businesses o Strategic Alliance are arrangements between two or more businesses with a common objective. This is important as labour is the greatest business expense. parts and energy as well as government regulations o Redistribute labour costs by taking advantage of low wages in developing countries. low risk way of getting into global business o Direct Exporting is the practice of using intermediaries to export products to other countries o Indirect Exporting occurs where a business sells its products directly to overseas buyers. technical experience and specialised . assets or companies. replaced with floating exchange rates. • Foreign Direct Investment – form of expansion where by a business invests in overseas businesses in order to gain control or property. o Overseas investors can invest on a countries capital markets o FDI is able to enter and leave a nations economy interaction between global business and Australian domestic business • Australian businesses rely on Australian domestic businesses to provide raw materials. finished goods and intermediate goods • FDI in Australian businesses link Australian domestic businesses with foreign businesses • Australian business managers have become prominent in the senior management of the worlds global growth (Rupert Murdoch) global business strategy • methods of international expansion • Exporting – the selling of products in overseas markets.• o Fixed exchange rates have become less common. management experience. raw materials. Businesses often use exporting as a low cost. • Relocation of Production – important factors in selecting the location of production include cost. • Management contracts – where one business provides managerial assistance. o To get around trade barriers countries may invest large amounts within countries involved in trading blocs in order to avoid tariffs imposed on non-member nations o Be closer to customers by building factories close to consumers in order to avoid costs associated with transport.

a Japanese business. • Minimising Tax – businesses can reduce tax burdens by relocating in countries with favourable tax laws. The receiving organisation will receive assistance without increasing foreign investment. capital or technology. patents. This may include technology. Disadvantages include loss of ownership over assets. The organisation providing the service will gain in terms of extra income and entry to foreign markets. Thus businesses can take advantage of regulatory differences. • Gaining Economies of scale – economies of scale are the cost reductions a business gains as it increases in size. businesses can minimise competition in any one market. copyrights. Advantages: the product may be in different stages of its life cycle in different countries. managerial or investment obligations. lengthening the life span of the product. However there are some ethical questions regarding this.• services to other organisations. They must follow strict guidelines in relation to quality and promotional aspects of the business. Advantage of taking advantage of foreign production without ownership. • Acquiring resources – businesses go global in order to acquire new resources or find cheaper resources than what are available domestically. Going global will increase the size of the business. trademarks and brand names. companies are able to increase sales. Businesses also go global in order to ensure supplies are reliable and not subject to price fluctuations. creates strategic deals with suppliers reasons for expansion • Increase sales and find new markets – by expanding overseas. work methods. (Nippon Saishi. designs. These resources could be labour. • Minimising competitive risk – by going global. Franchising gives the franchisor significant control over sale of its products. gives access to local knowledge. o Franchising – an arrangement where one business supplies another with intellectual property and managerial support. • Licensing and Franchises o Licensing – occurs where a business sells the right for their intellectual property to be used by other businesses. Caribbean) . It is low cost. Tax havens are countries with little of no taxation (Monaco. Skills can be passed onto workers locally. allowing it to take advantages in cost reductions through bulk buying • Taking advantage of regulatory differences – Domestic laws vary from country to country affecting businesses competitiveness (higher wages in Australia than in china). is a paper processing plant that owns forests in America) • Diversifying Markets and Suppliers – businesses go global in order to avoid swings in sales in any one country (skiing company may go global to retain sales year round).

Changes in exchange rates will impact in global businesses revenue. businesses can use the international capital market (network of individuals.  Fluctuations effect financial decisions. shares sold on domestic exchange to overseas borrowers o When borrowing from overseas. The exchange rate of a country is linked to interest rates within that country. expenses and profits o Foreign exchange risk currency fluctuations create many ricks for businesses  Transaction exposure occurs when a currency fluctuations can affect the financial cost or revenues of an overseas business transaction  Translation exposure occurs when currency fluctuations can affect the value of a businesses foreign assets. liabilities and profits  Economic exposure is the impact of unexpected exchange rate changes on the value of a business’ operations o Influence of currency fluctuations on business activities  Fluctuations effect production decisions for TNCs as they aim to generate costs in weak currencies whilst earning profits in a strong currency. businesses. financial institutions and governments who borrow funds and invest across borders) • political • Tensions between protection and free trade – free trade agreements between various countries have seen a reduction in the levels of protection.specific influences on global business • financial • The main financial influences on global businesses are: o Currency fluctuations global businesses undertake more complicated transactions where two or more businesses are involved o Exchange Rates is the price of one countries currency compared with another. overseas borrowing o Equity > Retained Profit. The outcome of the protection/free trade . Global businesses seek low interest rates when borrowing to expand their activities. o Debt > domestic. exchange rates will influence how much will be paid • Interest rates are the price of money. (high e/r = strong currency) • Overseas borrowing has enabled businesses to borrow funds from many sources. When paying interest/dividends.

WTO promotes the flow of free trade. Japan and Europe were the main offenders) o WTO the World Trade Organisation has the power to enforce international trade agreements making it more powerful than the GATT.• • • • debate is curtail fir global businesses as it effects the size of their profits and their ability to compete in international markets. o Trade Agreements are formed in order to promote international trde between countries. quotas ect…) o Customs Union where countries remove trade barriers and agree to a common trade policy against non-members o Common market economic integration which involves free movement of labour and capital among members. They do this from member consultation and negotiation and as a final resort can impose financial penalties on offenders. legal • Contracts – contracts vary from one country to another and managers must ensure they understand the specific practices of the countries in which they operate. the opening of new markets and the settlement of trade disputes among member nations. The WTO has powers in dispute settlement. Free trade and common trade to non-members o Economic Union member countries agree to coordinate their economic policy (monetary/fiscal) o Political union economic and political integration by member countries.  Multilateral Trade Agreements (more than 2 countries EU. GATT was successful for reducing protection in manufacturing goods. but treat non-members as they like (imposing tariffs. • Dispute Resolution o Which countries law applies? o In which country should the dispute be resolved? . NAFTA)  Bilateral Trade Agreements (only 2 countries CERTA) Types of Regional Agreement o Free trade area where member countries remove trade barriers. International Organisations and Treaties o GATT the General Agreement on Tariffs and trade was formed to promote free trading by reducing tariff protection and promote international trade. but less effective in agriculture (USA. War and civil unrest global businesses are affected by war and civil unrest in the countries in which they operate. There may be a change in the political environment which affects business activity.

• Tastes – different cultures have different tastes and preferences in goods/services. social/cultural • Language – language differences can create problems for global businesses particularly during trade negotiations. • Varying Business practices and ethics – business practices and ethical standards vary in different cultural environments. This can cause conflict for consumers in a number of ways. • Religion – religious influences global businesses as it impacts on the sorts of products that are consumed. A good step in the protection of intellectual property is through the WTO who enforces the Agreement on Trade-related Aspects of Intellectual Property Rights. . Global businesses must adapt their own style to fit in with the host countries practice o Nepotism refers to favouritism shown to relatives by those in power managing global business • financial • Methods of Payment – because of the unique nature of international trade and business transactions. o Bribes are accepted as normal business practice in many countries. Unspoken language (gestures) also differs between nations and can create problems for global businesses.• o What resolution methods should be used? o How will the settlement be enforced? • Principle of comity – is a legal provision that a country will honour and enforce decisions of foreign courts as long as these decisions do not break the laws. Since legal action is expensive and allows few avenues and the outcomes are uncertain. work schedules and the role of individuals in society. The OECD has attempted to stop bribery in international business transactions o Gift Giving and hospitality are important means of business communication in many cultures (Japan) o Negotiations styles vary from culture to culture. other methods such as conciliation and arbitration are used. a variety of payment methods has developed to facilitate trade. The WTO sets detailed minimum standards of protection that each member nation must provide. • Intellectual Property – a business’ intellectual property can be the most valuable asset it possesses and therefore it must be protected. Global companies that customise their products to foreign tastes will be the most successful in foreign markets.

Receiving payment in advance is safest method o Open Account – where the exporter delivers the goods and later bills the importer. A . By using a letter of credit an exporter is guaranteed payment from the importers bank • Hedging – practice of protecting the business from adverse changes in exchange rate by entering into a contract at the present time to buy or sell foreign exchange at a specified rate on a given date in the future • Derivatives – this is a financial instrument whose value is derived from other commodities or financial instruments • Insurance – global businesses face risks such as war and civil unrest.• o Advance payment – payment sent to the exporter by mail. The Australian Gov. • Obtaining Finance – because international activities are often risky. EFFIC can provide guarantees to allow businesses to arrange finance with banks and/or businesses in other countries marketing • Market Research – while marketing principles remain the same for some businesses. electronic transfer or bank draft. Commonly used o Letters of Credit – guarantee by the importers bank when the exporter fulfils the terms of the document o Irrevocable letter of credit – can not be changed of altered without the approval of both parties o Revocable Letter of Credit – can be changed or cancelled without the consent of all parties • Credit Risk – as with any commercial transaction a business accessing credit should check the credit rating of their customer. Aust domestic banks and AusTrade also offer credit ratings for customers. These include: o Different values o Different political systems o Different legal systems o Availability and reliability of secondary data o Difficulty in collecting primary data (language) o Differing definitions between developed nations (pepsico consumption) • Global Branding – a global brand is a brand name that is the same in all markets regardless of their respective languages. principles vary between countries making market research difficult for businesses. banks are often unwilling to provide finance. has created the Export Finance and Insurance Corporation (EFIC) to ensure Australian overseas investment. Obvious risk for the exporter o Documentary Collection – export/import financing where a bank acts as an intermediary without any financial risk.

Global businesses need to choose between centralised division making (head office tightly controls decisions of . sars) • Standardisation and Differentiation – standardisation involves offering a common product on a world wide basis. • Sourcing – a set of processes and steps a business uses to acquire resources it needs to make its own products o Vertical integration occurs where a business controls the supply of its inputs and/or the distribution of its outputs o Make or buy – the level of vertical integration depends on management decisions to make of buy their inputs  Reasons to make: lower costs. the marketing mix may vary from country to country. fashion. For global businesses operations management is complex concerning decisions of: where to acquire inputs. greater flexibility (use of a number of suppliers) • Global Web – refers to businesses that locate production facilities in different countries. transport logistics. • employment relations • Organisational Structure – refers to the way a business divides its activities among separate units and coordinates the activities among these units. Advantages of this are: o Aimed at global consumers o Achieve economies of scale o Savings in research and development o Economies in marketing There is the same debate that argues businesses should customise their products. managing inventory. o Advantages  Instant recognition around the world  Savings in promotion cost o Disadvantages – translation of brand names into different languages can cause different meanings (pshitt. This can be based on brand will have the same positioning (image in the mind of consumers) around the world. Customisation refers to changes made to a product to fit in with global needs • Differentiation – differentiation is a strategy in which a business develops a marketing mix that makes t stand out from its competitors. reliability. product design or brand name • operations Operations is the set of activities that transports inputs into finished goods and services. Transnational Companies can gain a competitive advantage by coordinating operations across national borders. However. greater control of supply and quantity  Reasons to buy: lower risk. location of offices and production facilities.

Generally. social structure and political processes  Expensive to relocate.• • • • foreign subsidiaries) or decentralised decision making (where subsidiaries have more autonomy) o Advantages of centralised decision making  Manager helps coordinate activities  Helps to coordinate financial resources  Allows one corporate strategy o Advantages of decentralised decision making  Local subsidiaries have better understanding of the culture. . Some businesses prefer to use home country managers (Ethnocentric) o Advantages of ethnocentric  Share common culture with corporate headquarters  Best to transfer successful business practices in other countries o Disadvantages  Lack knowledge of host countries laws. maintain in host country  Host countries sometimes restrict number of foreign employees Shortage of Skilled Labour – global businesses will face different supplies of skilled labour depending on which countries they will locate operations in Labour Law Variations – global businesses face different labour laws for their employees in different countries this makes employment relations for global businesses more complex. train. culture. staffing involves recruitment. wages and working conditions vary from country to country. The main labour law variations apply to o Pay and fringe benefits o Equal employment opportunities/discrimination o Labour relations Minimum standards of labour – standards of labour. laws and competitors in their market  decentralised decisions are able to become more responsive to changes  the products could be better suited to the local customers o types of organisational structure include:  Division Structure  Area Structure  Product structure  Global Matrix Structure Staffing – for global businesses. policies. training and maintenance of management and production staff.

. the International Labour Organisation (ILO) is a united nations agency. or third country • evaluation • As part of the management process. managers can re-examine the business strategies. products. are needed? Control can be defined as the monitoring of activities to make sure that they are meeting objectives Measure of actual performance -> compare actual performance against objectives -> take action to correct performance if necessary • modifications of strategies according to changes in global market • Once a business has evaluated its performance. better educated and better protected labour than less developed nations. where workers feel disorientated because of the inability to adopt to new culture  Polycentric where the host country staffing are employed in seniour management positions • Advantages o Cheaper o Know the local market • Disadvantages o Potential to loose control of operation  Geocentric is where the best available person is employed in senior management regardless of their nationality. employees or the structure of the business itself. businesses should evaluate the results of their strategies. asking questions such as: o How effective have the strategies been? o What adjustments. and has identified success and failures. It seeks to improve human labour rights and promote social justice o Staffing systems – there are three types of staffing systems  Ethnocentric where home countries nationals are used in senior management positions • Advantages: o Helps spread corporate culture o Better managers than are available locally • Disadvantages o Expensive to relocate o Managers can suffer culture shock. managers need to take some action.developed nations have higher paid. They could be home country. If the reason for the difference in performance and objectives is poor performance. host country. if any.

Vanuatu. Luxemburg. responsibility in a global environment • ethical practice • Tax Havens and Transfer pricing o Tax Havens are economies that impose little or no corporate income tax. Bahamas. Monaco. an ethical question arises about selling products banned in one market but not in others (pesticides) • Ecological sustainability – this is the idea that natural resources should be used to meet the needs of the present generation without compromising the ability of future generations to meet their needs. it could be seen as unethical. o Transfer Pricing can be used by a global business to shift profits to low tax countries. . Eg Cayman Islands. Some governments have began to regulate transfer pricing by using arms length pricing • Minimum standards of labour – global businesses can take three main approaches to applying workplace labour standards: o Adopt local standards of pay and conditions o Can set a global standard for their whole business o Can set a global minimum standard  Advantages • Good image/reputation • May help entering into new markets • Allows the business to benchmark • Allows transfer of expertise amongst countries • Dumping illegal products – because consumer protection laws vary from country to country. While this is legal.

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