Business Studies

Stage 6

Study Notes

HSC TOPIC 1: BUSINESS MANAGEMENT AND CHANGE................................ ................................ ...... 3 NATURE OF MANAGEMENT ................................ ................................ ................................ ..................... 5 UNDERSTANDING BUSINESS ORGANISATIONS WITH REFERENCE TO MANAGEMENT THEORIES .............................. 7 MANAGING CHANGE ................................ ................................ ................................ ............................ 10 HSC TOPIC 2: FINANCIAL PLANNING AND MANAGEMENT................................ ............................... 13 THE ROLE OF FINANCIAL PLANNING ................................ ................................ ................................ ......... 15 FINANCIAL MARKETS RELEVANT TO BUSINESS FINANCIAL NEEDS................................ ................................ ... 16 MANAGEMENT OF FUNDS ................................ ................................ ................................ ..................... 17 USING FINANCIAL INFORMATION ................................ ................................ ................................ ............ 18 HSC TOPIC 3: MARKETING ................................ ................................ ................................ ............... 20 NATURE AND ROLE OF MARKETS AND MARKETING ................................ ................................ .................... 22 MARKET RESEARCH PROCESS ................................ ................................ ................................ ................. 25 CUSTOMER AND BUYER BEHAVIOUR ................................ ................................ ................................ ........ 26 DEVELOPING MARKETING STRATEGIES ................................ ................................ ................................ ..... 28 ETHICAL AND LEGAL ASPECTS ................................ ................................ ................................ ................. 31 HSC TOPIC 4: EMPLOYMENT RELATIONS ................................ ................................ ......................... 33 NATURE OF EMPLOYMENT RELATIONS ................................ ................................ ................................ ..... 35 KEY INFLUENCES ON EMPLOYMENT RELATIONS ................................ ................................ .......................... 36 EFFECTIVE EMPLOYMENT RELATIONS ................................ ................................ ................................ ....... 37 LEGAL FRAMEWORK OF EMPLOYMENT ................................ ................................ ................................ ..... 40 INDUSTRIAL CONFLICT ................................ ................................ ................................ ........................... 41 ETHICAL AND LEGAL ASPECTS ................................ ................................ ................................ ................. 44 HSC TOPIC 5: GLOBAL BUSINESS ................................ ................................ ................................ ...... 45 GLOBALISATION ................................ ................................ ................................ ................................ ... 48 GLOBAL BUSINESS STRATEGY ................................ ................................ ................................ ................. 49 SPECIFIC INFLUENCES ON GLOBAL BUSINESS ................................ ................................ .............................. 52 MANAGING GLOBAL BUSINESS ................................ ................................ ................................ ............... 53 MANAGEMENT RESPONSIBILITY IN A GLOBAL ENVIRONMENT ................................ ................................ ....... 55

Business Studies Study Notes

HSC Topic 1: Business Management and Change
Content
Students learn to: use existing business case studies to investigate and communicate ideas and issues related to business management and change. The focus of these case studies will be to: ‡ analyse how management theories apply to va rious business situations ‡ explain and evaluate how change is managed in one or more businesses. Students learn about: the nature of management ‡ the importance of effective management ‡ management roles ± interpersonal, informational, decisional ‡ skills of management ± people skills, strategic thinking, vision, flexibility and adaptability to change, self-managing, teamwork, complex problem-solving and decision-making, ethical and high personal standards ‡ responsibility to stakeholders; reconcilin g conflicts of interest understanding business organisations with reference to management theories ‡ classical-scientific ± management as planning, organising and controlling ± hierarchical organisational structure based on division of labour ± autocratic leadership style ‡ behavioural ± management as leading, motivating, communicating ± flat organisational structure, teams ± participative/democratic leadership style ‡ political ± uses of power and influence, management as negotiating and bargaining ± structure as coalitions ± stakeholder view ‡ strengths and weaknesses of the classical, behavioural and political approaches ‡ systems/contingency ± adapting management and organisational approaches to circumstances managing change ‡ nature and sources of change in business ± external influences ² the changing nature of markets; economic, financial, geographic, social, legal, political and technological developments ± internal influences ² effects of accelerating technology including e-commerce, new systems and procedures, new business cultures
Ryan McDonald SHS 3

Business Studies Study Notes

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structural responses to change ² outsourcing, flat structures, strategic alliances and networks reasons for resistance to change ± financial costs ² purchasing new equipment, redundancy payouts, retraining, reorganising plant layout ± inertia of managers, owners ± cultural incompatibility in mergers/takeovers ± staffing ² de-skilling, acquiring new skills, loss of career prospects/promotional opportunities managing change effectively ± identifying the need for c hange ± setting achievable goals ± creating culture of change (encouraging teamwork approach using change agents) ± change models ² force-field analysis, Lewin¶s unfreeze/change/refreeze model

change and social responsibility ‡ ecological sustainability, quality of working life, technology, globalisation/ managing cultural diversity, e-commerce.

Ryan McDonald

SHS

4

Business Studies Study Notes

Nature of Management
The traditional definition of management is the process of coordinating a business¶s resources to achieve its goals. The resources of a business are: y Human resources are the employees of the business and are generally its most important asset. y Information resources include the knowledge and data required by the business, such as market research, sales reports, economic forecasts, technical material and legal advice. y Physical resources include equipment, machinery, buildings and raw materials. y Financial resources are the funds the business uses to meet its obligations to various creditors. A manager is someone who coordinates the business¶s limited resources to achieve specific goals. A contemporary definition of management views managements as the process of working with and through other people to achieve business goals in a changing environment. Crucial to this process is the effective and efficient use of limited resources. According to this definition, management requires: y Working with and through others. y Achieving the goals of the business. y Getting the most from limited resources. y Balancing effectiveness and efficiency. y Coping with a rapidly changing environment. The 8 Skills a Manager must possess are: y People skills y Strategic thinking skills y Vision skills y Flexibility and adaptability to change skills y Self-managing skills y Teamwork skills y Complex problem-solving and decision-making skills y High personal standards and ethics Stakeholders are groups of individuals who interact with the business and thus have a vested interest in its activities. A business¶s responsibilities to its stakeholders are: y Change management y Social justice y Ecological sustainability y Compliance with the law y Codes of practice y Reconciling conflicts of interest

Ryan McDonald

SHS

5

g. policies. suppliers) Monitor y Informational Disseminator y Spokesperson y y y y y y y y Entrepreneur Disturbance Handler Resource Allocator Negotiator Decision Making y y y An interpersonal role is one in which the manager deals with people. A decision-making role is one involves solving problems and making choices. An informational role is one in which the manager gathers and disseminates information within the business. financial.Business Studies Study Notes Management Roles: Category Role y y y Description Performs ceremonial duties Symbol of legal authority Motivates employees Figurehead Interpersonal Leader y y y Liaison Establishes and maintains a network of contacts Interacts with other organisations Seeks and receives information from a wide variety of sources to gain better understanding of the business and its environment Shares information with selected employees within the business Presents to outsiders information about the business¶s plans. Ryan McDonald SHS 6 . results and structure Scans the environment for opportunities Initiates projects to improve performance Brings about change Deals with issues and crises inside and outside the business Takes corrective action Decides who should get what resources Allocates the human. unions. physical and information resources Participates in negotiations with other parties (e. also providing it to the outside world.

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

orderly lines of communication and authority Emphasises the important role of money as a motivator  l S S ¡£ §¦ ¥   ¤ t ¡£   ¤ ¡¡£¢ ¡  Outputs Outcomes: y Products ± goods and services y Profits and losses y Employment y Waste and pollution y y y y y y y y y Weaknesses Boredom resulting from production line approach Rigidity of autocratic leadership style Lack of employee empowerment Neglects the ³human´ and social needs of employees Employees are motivated not only by material gain Today¶s better educated employees are less willing to accept formal authority Sense of impersonality and alienation between managers and employees Fails to acknowledge the informal organisational structures Overlooks employees need for job satisfaction ¤ 8 ©¢§ ¢©¥¨ . organising and controlling are the central management functions Specialisation and division of labour Clear. A diagrammatic representati n of this is: Inputs Transformational Processes Resources: y Human y Equipment y Financial y Informational y Materials y Management Managerial Abilities: y Planning y Organising y Controlling y Leading Contingency theory stresses the need for flexibility and adaptation of management practices and ideas to suit changing circumstances.B i St i St The systems management approach views organisations as an integrated process in which o all the individual parts contri ute to the whole. y y y y y y Classical Scienti ic y y y y Strengths Based on scientific principles Work methods may be improved through time and motion study Results in increased productivity Management may be trained Measurements may be analysed to verify improvement in output Individuals interests subordinated to the survival of the business Planning. Both systems and contingency management theories are based on adapting management and organisational approaches to changing circumstances.

group dynamics. teamwork.Business Studies Study Notes y y y y Behavioural y y y y y y y y y Political y y y Acknowledges the importance of the human dimension of work Integrates ideas from sociology. only explain them Ryan McDonald SHS 9 . managers are more able to prepare themselves for managing people Recognises the ³power plays´ within groups of people Acknowledges that individuals will pursue their own interests Explains the existence of hidden agendas Points out the existence and importance of coalitions Highlights the need for managers to adopt new skills in negotiating. psychology and anthropology Outlines the importance of human resource managers Highlights the importance of communications. motivation and leadership Stresses the importance of conflict resolution mechanisms Greater empowerment of employees due to flatter management structures Participative or democratic leadership style acknowledged By understanding basic psychology. digest and apply Provides only a superficial explanation of organisational politics and power Sources of real power are often difficult to locate and analyse Relies on personal observation and perception rather than scientific measurements Entrenched power positions are often overlooked Managerial dominance and control over employees may become acceptable behaviour Many view some of the strategies used as manipulative Managers may become hypersensitive about the strengths of their coalitions which affect their performance Does not attempt to change the power relationships. bargaining and conflict resolution Explains power bases Argues that all stakeholders views need to be taken into account Provides a mechanism for using power to achieve a wide range of stakeholder demands y y y y y y y y y y y y y y y y y Complex theoretical concepts Positive results may not always be immediate Difficulty in accurately predicting human behaviour Some degree of conflict between the various behavioural theories No simple formulas can be designed to explain complex personal behaviour What motivates one individual may lessen another¶s motivation Management practice which was previously successful may not continue to work over time Many behavioural theories appear to abstract to apply to the ³real´ world Vast amounts of research for managers to read.

Business Studies Study Notes Managing Change Change is any alteration in the business and work environment. that is. The internal business environment comprises the factors and characteristics that are within the direct control of owners. directors and managers. Reasons for Resistance to Change: Financial Costs Inertia Cultural Incompatibility in Mergers and Takeovers y Possible ³culture clash´ Staffing Considerations y y y y New equipment Redundancy payouts Retraining workforce Reorganising plant layout y y Lack of interest Refusal to cooperate by managers/owners y y y De-skilling Acquiring new skills Loss of career prospects or opportunities for promotion Ryan McDonald SHS 10 . The main sources of change in a business are: External Factors Changing nature of markets Economic Financial Geographic Social Legal Political Technological Internal Factors Accelerating technology E-commerce New systems and procedures New business cultures y y y y y y y y y y y y Structural change refers to changes in how the business is organised. The external business environment comprises the factors and characteristics that are largely outside the direct control of owners. directors and managers. y Flat structures ± the increasing of spans of control. Structural responses to change include: y Outsourcing ± the contracting of some business operations to outside suppliers. y Strategic networks ± these exist solely to provide administrative control of another business or set of businesses that perform all the functions needed to produces and sell the product. y Strategic alliances ± this is when two or more businesses join together and pool their resources. the organisational structure.

Business Studies Study Notes Strategies for Reducing Resistance to Change include: y y y y Identifying the need for change Setting achievable goals Creating a culture of change (including encouraging a teamwork approach using change agents) Change models o Force-field analysis o Lewin¶s unfreeze-change-refreeze model Change and Social Responsibility relates to: y Ecological sustainability y Quality of working life y Technology y Globalisation/managing cultural diversity y E-commerce Ryan McDonald SHS 11 .

Business Studies Study Notes Ryan McDonald SHS 12 .

with similar businesses. determining financial elements of the business plan. profitability. developing budgets. debentures) leasing. return on capital ‡ the planning cycle ² addressing present financial position. balance sheet ± the accounting equation and relationships ‡ types of financial ratios Ryan McDonald SHS 13 . venture capital. (overdraft. risks. financial reports. cash flows. financial and insurance companies. long -term borrowing (mortgage. government (Reserve Bank of Australia) ‡ role of the Australian Stock Exchange as a primary market ‡ overseas and domestic market influences and trends in financial markets and their implications for business financial needs management of funds ‡ sources of funds ± internal ² owners¶ equity. Students learn about: the role of financial planning ‡ strategic role of financial management ‡ objectives of financial management ² liquidity. planning financial controls. minimising financial risks and losses financial markets relevant to business financial needs ‡ major participants in financial markets including banks. companies. merchant banks.Business Studies Study Notes HSC Topic 2: Financial Planning and Management Content Students learn to: use existing business case studies to investigate and communicate ideas and issues related to financial planning and management. retained profits ± external ² short-term borrowing. gearing/leverage using financial information ‡ the accounting framework ± financial statements ² revenue statement. growth. bank bills). maintaining record systems. The focus of these case studies will be to: ‡ interpret the published annual reports of one or more businesses ‡ analyse the financial statements of one or more businesses (real or imaginary) ‡ undertake comparative ratio analysis ² over a period of time. efficiency. grants ‡ financial considerations ² matching the terms and source of finance to business purpose and structure ‡ comparison of debt and equity financing. factoring. interpretation. superannuatio n/mutual funds. including costs and benefits. against common standards.

discounts for early payments ‡ effective profitability management ± cost control ² fixed and variable. with similar businesses. net profit ratio. loans. sales mix.Business Studies Study Notes ‡ ‡ ± liquidity ² current ratio ± solvency ² gearing debt to equity ± profitability ² gross profit ratio. inappropriate cut off periods. expense minimisation ± revenue controls ² sales objectives. misuse of funds ‡ Australian Securities and Investments Commission ‡ corporate raiders and asset stripping. return on owners¶ equity ± efficiency ² expense ratio. overdrafts ‡ strategies for managing working capital ² leasing. against common standards limitations of financial reports ± historical costs. pricing policy ethical and legal aspects ‡ audited accounts. value of intangibles effective working capital (liquidity) management ‡ the working capital ratio ‡ control of current assets ² cash. receivables. Ryan McDonald SHS 14 . sale and lease back effective financial planning ‡ effective cash flow management ± cash flow statements ± management strategies ² distribution of payments. inventories ‡ control of current liabilities ² payables. cost centres. factoring. accounts receivable turnover ratio comparative ratio analysis ± over time.

identifying and evaluating alternative courses of action and choosing the best alternative for the organisation. Ryan McDonald SHS ! Maintaining Record Systems Developing B dgets       Minimising Financial Risk and Losses Address g resent F nanc al s tion  Determining Financial Elements of the B siness lan "  15 . y Profitability ± The ability of an organisation to maximize its profits.Business Studies Study Notes The Role of Financial Planning Financial management is the planning and monitoring of an organisations financial resources to enable the organisation to achieve its financial goals. y Return on Capital ± The amount of profit returned to owners or shareholders as a percentage of their capital contribution. y Efficiency ± The ability of a business to use its resources effectively ensuring financial stability and profitability. The Planning Cycle Diagram: l anning Financial Controls nterpreting Financial Reports Monitoring Cash Flows y The planning processes involve the setting of goals and objectives. y Growth ± The ability of the organisation to increase its size in the longer term. determining the strategies to achieve those goals and objectives. It encompasses: y Liquidity ± The extent to which a business can meet its financial commitments in the short term.

institutions and systems supplying excess funds to those who require them. Domestic Market Influences include: o Employment patterns o Level of economic growth o Changes in interest rates o Changes in government policy o Changes in inflation rate o Competing demands for funds Overseas Market Influences include: o Foreign government intervention o Foreign exchange rates o World events o Accounting regulations affecting foreign markets o Tax regulations for foreign operators o Political risks o Differences in interest rates between countries y y y y y Derivatives are financial instruments used to hedge against businesses that have to deal with uncertain prices of their own products or their purchases. and ³market´ indicates trading activity. The 4 Types of OTC Markets are: o Cash and securities markets o Foreign exchange markets o Commodity markets o Derivatives markets The main participants in the financial markets are: o Banks o Finance and insurance companies o Merchant or investment banks o Superannuation funds o Mutual funds o Public and private companies o Reserve Bank Primary markets deal with new issue of debt instruments by the borrower of funds. The term ³financial´ relates to money. but transactions take place via telephone and other means of communication. Over-the-Counter (OTC)markets are not traded on an exchange.Business Studies Study Notes Financial Markets Relevant to Business Financial Needs y y y y y Financial markets are made up of the individuals. Secondary markets deal with the purchase and sale of existing securities. Ryan McDonald SHS 16 . such as the Australian Stock Exchange (ASX) and Sydney Futures Exchange (SFE). Financial intermediaries receive money from those with excess funds and provide finance to those wishing to borrow money. Exchange traded markets are those traded on an authorized exchange.

Considerations for a business¶s gearing include: o Return on investment o Cost of debt o Size and stability of the business¶s earning capacity o Liquidity of the business¶s assets o Purposes of short term debt y y y y y y y y Ryan McDonald SHS 17 . Venture capital is funds supplied by private investors or specialist investment organisations. or gearing. either to new business or to established businesses ready to grow or diversify. including banks. Costs to be considered in using debt finance include: o Repayment of principal o Interest payments o Timing of repayments o Administrative and legal costs associated with borrowing o Conditions and terms of borrowing o Tax considerations o Maturity date of the loan as refinancing may be required o Level of control by the lender Restrictive covenants set down what a borrower can or cannot do for the period of a loan. is the proportion of debt (external finance) and the proportion of equity (internal finance) that is used to finance the activities of a business. Internal finance is the funds provided by the owners of the business (capital) or from the outcomes of business activities (retained earnings). other financial institutions. Owners¶ equity is the funds contributed by owners or partners to establish and build the business.Business Studies Study Notes Management of Funds y y y Financial decision making requires relevant information to be identified. government. collected and analyzed to determine an appropriate course of action. External Sources of Funding are: o Bank overdraft o Bank bills o Trade credit o Factoring o Mortgaging o Debentures o Leasing Internal Sources of Funding are: o Owners¶ personal funds o Retained earnings External finance is the funds provided by sources outside the business. Leverage. suppliers or financial intermediaries.

The accounting formulae are: o Assets = Liabilities + Owners Equity o Owners¶ Equity = Assets ± Liabilities o Liabilities = Assets ± Owners Equity The types of financial ratios can be defined by four categories. liabilities and owners¶ equity. The revenue statement shows the operating results for a period. Accounts Receivable Turnover Ratio  Efficiency is the ability of the firm to use its resources effectively in ensuring financial stability and profitability. and represents the net worth of the business. y y Ryan McDonald SHS 1 # . shows the relationship between assets. Return on Owners Equity  Profitability is the earning performance of the business and indicates its capacity to use its resources to maximize profits. stored and then summarized in a meaningful and accepted form. o Efficiency ± Expense Ratio. Financial statements summarise the activities of an organisation over a period of time. o Profitability ± Gross and Net Profit Ratios. A balance sheet represents an organisations assets and liabilities at a particular point in time. The accounting equation forms the basis of the accounting process. expressed in monetary terms. relating too: o Liquidity ± Current Ratio  Liquidity is the extent to which the business can meet its financial commitments in the short term. o Solvency ± Debt to Equity  Solvency is the extent to which the business can meet its financial commitments in the longer term.Business Studies Study Notes Using Financial Information y y y y The accounting framework consists of raw data that is processed. It shows the revenue earned and expenses incurred over the period with the resultant profit or loss.

Business Studies Study Notes Ryan McDonald SHS 19 .

religious organisations ‡ the buying process ² buyers and users ‡ factors influencing customer choice ² psychological. sociocultural. mass. data analysis and interpretation customer and buyer behaviour ‡ types of customers ² people. monitoring and controlling ² developing a financial forecast. The focus of these case studies will be to: ‡ analyse and evaluate marketing strategies for a product o r service ‡ analyse the marketing plan of a business ‡ construct a marketing plan for a single product/service (real or imaginary). clubs and societies. industrial. economic. niche ‡ production±selling±marketing orientation ‡ the marketing concept ² customer orientation. firms. market and competition-based Ryan McDonald SHS 20 . consumer. comparing actual and planned res ults. government developing marketing strategies ‡ market segmentation and product/service differentiation ‡ product and service ± positioning ± branding ± packaging ‡ price including pricing methods ² cost.Business Studies Study Notes HSC Topic 3: Marketing Content Students learn to: use existing business case studies to investigate and communicate ideas and issues related to marketing. and revising the marketing strategy market research process ‡ determining information needs. Students learn about: nature and role of markets and marketing ‡ the role of marketing in the firm and in society ‡ types of markets ² resource. relationship marketing ‡ marketing planning process elements of a marketing plan ‡ situational analysis including SWOT and product life cycle ‡ establishing market objectives ‡ identifying target market ‡ developing marketing strategies ‡ implementation. households. educational institutions. intermediate. data collection (primary and secondary). government.

public relations ± the communication process including opinion leaders and word of mouth place/distribution ± distribution channels and reasons for intermediaries ± channel choice including intensive. price po ints ± price and quality interaction promotion ± elements of the promotion mix ² personal selling. local government ethical and legal aspects ‡ environmentally responsible products ‡ other issues including creation of needs.Business Studies Study Notes ‡ ‡ ‡ ± pricing strategies/tactics ² skimming. Ryan McDonald SHS 21 . selective. exclusive ± physical distribution issues including transport. impacts of retail developments. penetration. inventory environmental effects on distribution ² technology. loss leaders. advertising. warehousing. sugging (selling under the guise of research) ‡ role of consumer laws in dealing with ± deceptive and misleading advertising ± price discrimination ± implied conditions ± warranties ± resale price maintenance. below -theline promotions.

A market is a group of individuals. goods and services to create exchanges that satisfy the individual and organizational objectives. including mining. The main approaches to marketing are: y The production approach was used primarily between 1820 and 1910 and consisted of business mass-producing products. Marketing consisted of advertising and personal selling. y An intermediate market consists of wholesalers and retailers who purchase finished products and resell them to make a profit. This is achieved through: o An emphasis on marketing products. y Are socially and legally authorized to purchase the product. o Identifying consumer needs. also known as a concentrated or micro-market. organisations or both that: y Need or want a product. agriculture. y Consumer markets consist of individuals ± that is. promotion and distribution of ideas. y The marketing approach has been used from 1960 onwards. y A niche market. o Establishing and maintaining customer relationships. mass-distributes and mass-promotes one product to all buyers. y The industrial market includes industries and businesses that purchase products to use in the production of other products or in their daily operations. pricing. y Are willing to spend their money to obtain the product. and was based primarily on selling goods. Relationship marketing is the development of long-term and cost-effective relationships with individual customers. o Producing products for customers¶ demands. Marketing primarily consisted of taking orders and delivering the products. y In mass markets. Ryan McDonald SHS 22 . which occurs when a business bases its marketing decisions and practices on its customers wants. y Have the money (purchasing power) to purchase the product. Marketing concept is a business philosophy that states that all sections of the business are involved in satisfying a customer¶s needs and wants while achieving the business¶s goals. is created when the mass market is finely divided into smaller markets consisting of buyers who have specific needs or lifestyles. and focuses on using a coordinated effort aimed at satisfying consumers¶ needs. members of a household who plan to use or consume the products they buy. y The sales approach was used mainly between 1920 and 1960.Business Studies Study Notes Nature and Role of Markets and Marketing Marketing is the process of planning and executing the conception. forestry and fishing. The main types of markets are: y The resource market consists of those individuals or groups that are engaged in all forms of primary production. the seller mass-produces. This is achieved through customer orientation.

2. The elements of a marketing plan are: 1. Product ± including brand name. Cost Estimate ± how much is the marketing plan expected to cost? Costs of the marketing plan can be divided into four major components. 3. The four main variables used by marketing managers are: 1. 3. town. They are: 1. Customer service means responding to the needs and problems of the customer. Marketing management is the process of monitoring and modifying the marketing plan. Psychographic ± personality. Establishing market objectives. discounts. 2. climate and landform. occupation. Implementing. rural. The four main marketing objectives are: y Increasing Market Share ± refers to the business¶s share of the total industry sales for a particular market. motives and lifestyle. The target market is the group of customers to which the business intends to sell its products. which refers to the presence of a business and the range of its products across a suburb. family size and social class. price sensitivity and end use.Business Studies Study Notes Strategic marketing planning is the process of developing and implementing marketing strategies to achieve the marketing objectives. Market segmentation occurs when the total market is subdivided into groups of people who share one or more common characteristics. y Expanding Product Range ± this is measured through a company¶s product mix. Product-related ± regular user. Developing marketing strategies. brand loyalty. transport and inventory. suburban. positioning and warranties. The Four P¶s of Marketing are: 1. A marketing objective is a statement of what is to be achieved through the marketing activities. 2. Marketing objectives are outlined in the marketing plan. Geographic ± urban. city state or country. y Maximising Customer Service ± this relates to a business¶s ability to meet the needs of the consumer. religion. Promotion ± including advertising. which is the total range of products offered by a business. 4. warehousing. ethnicity. Performing situational analysis. income. Price ± including list price. region. distribution. 4. Place ± including location of markets. These are: y Market research y Product development y Promotion ± including advertising and packaging y Distribution Ryan McDonald SHS 23 . first-time user. 4. y Expanding Existing Markets ± a key measure of this is a business¶s geographical representation. Identifying target markets. 3. packaging. education level. sales promotion and publicity. monitoring and controlling. including SWOT and product life cycle analysis. A situational analysis investigates the marketing opportunities and potential problems. 5. Marketing strategies are plans that outline how a business will use its marketing objectives. credit terms and payment period. Demographic ± age. gender. Developing a financial forecast requires two steps.

and the marketing mix constantly needs to be updated and modified. Changes in the marketing plan are necessary because all businesses operate in a dynamic environment.Business Studies Study Notes 2. Sales analysis is the comparing of actual sales with forecast sales to determine the effectiveness of the marketing strategy. Ways through which this can be achieved include: y Product modifications y Price modifications y Promotion modifications y Place modifications y The development of new products y Product deletion Ryan McDonald SHS 24 . Revenue Estimate ± how much revenue is the marketing plan expected to generate? Forecasting revenue is based on two key questions. These are: y How much consumers are expected to buy and for what price? y What sales staff predict they will sell? Comparing actual and planned results can be analysed through: 1. Marketing profitability analysis is a method in which the business breaks down the total marketing costs into specific marketing activities. Market share analysis 3. 2.

There are two types of secondary data. 2. These are: 1. Marketing data is either: y Primary data is the facts and figures collected from original sources for the specific research of the problem. typical or deviations from typical patterns. External data refers to published data from outside the business. Internal data refers to information that has already been collected from inside the business. y May be used to increase sales and profits. Statistical interpretation analysis is the process of focusing on the data that represents average. Experimentation y Secondary data is information that has been collected by some other person or organisation. relevant to the defined marketing problem. Survey 2. Ryan McDonald SHS 25 . recording and analysing information covering a specific marketing problem. Observation 3.Business Studies Study Notes Market Research Process Market research is the process of systematically collecting. Marketing data refers to the information. The three main methods used to gather primary data are: 1. Information is useful if it: y Results in marketing strategies that met the needs of the business¶s target market. y Assists business to achieve its marketing objectives.

as outlined below. The steps involved in this process are: 1. o Families/households ± household spending refers to the combined purchases of the individuals living together. 2. Evaluate after purchase o Weighing up the suitability of the products o Satisfaction gained o Dissatisfaction may occur A buyer is the individual or group who purchases the product. Recognise problem o Need or want requiring satisfaction. Organisation customers o Businesses ± the business market consists of all those businesses that purchase goods and services for further processing or for use in their production process. A user is the individual or group who actually uses the product being purchased. The lowest bid that meets the specification is usually accepted. Search for information o Brand names o Product characteristics o Warranty o Service o Price 3. This is used to classify consumers into four categories. These categories are: 1. Ryan McDonald SHS 26 . Government customers ± tendering is a process whereby firms submit quotes to supply a good or service. Purchase o Particular choice made o Product bought 5. Individual and household customers o People (personal) ± personal spending refers to consumer purchases by individuals. Evaluate alternatives o Various alternatives discovered o Cost benefit analysis 4. Institutional customers o Religious organisations o Clubs and societies o Educational establishments 4. 3. which is the decisions and actions involved in buying and using products. 2. o Federal o State o Local The buying process is the series of common steps.Business Studies Study Notes Customer and Buyer Behaviour Buyer behaviour.

o Moti es ± the reason that makes an individual do something. These are categori ed into: o Family and roles o Peer group o Social class o Culture and subculture Economic factors are the last key force exerted on a consumer. They are categori ed into: o Perception ± the process through which people select.Psychological factors are influences within an individual that affect his or her buying behaviour. o Personality ± an individual¶s personality is the collection of all the behaviors and characteristics that make up that person. o Attitudes ± an attitude is a person¶s overall feeling about an object or activity. They can be classified into: o Boom o Contraction o Recession o Expansion Government ociocultural FACT RS INFLUENCING CONSUMER CHOICE 7 ( 3&1654 &3)2 l S S 98 @ sychological %' 10 )($ %' ($ %%'& %$ A B i St i St t conomic B C . Sociocultural influences are forces exerted by other people and groups that have affect an individual¶s buying behaviour. organise and interpret information to create meaning.

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

y Below-the-line promotions ± are promotional activities for which the business does not make use of an advertising agency. y Manufacturer¶s or national brands are those owned by a manufacturer. The promotion mix is the various methods a business uses in its promotional campaign. y Generic brands are products with no brand name at all. y Packaging involves the development of the container and the graphic design for a product. Advertising media refers to the many forms of communication used to reach an audience. persuade and remind a target market about its products. y Loss leader ± involves deliberately selling a product below its cost price to attract customers. y A brand symbol or logo is a graphic representation that identifies a business or product. Methods include: y Personal selling ± involves the activities of a sales representative directed to a customer in an attempt to make a sale. or price points. symbol.Business Studies Study Notes POSITIONING y A product is a good or service. is the process of developing and promoting differences between the business¶s products and those if its competitors. y Product positioning refers to the development of a product image as compared with the image of competing products. y Prestige pricing ± is used where a high price is charged to give the product an aura of quality and status. non-personal message communicated through a mass medium. in its broadest sense. term. y Product differentiation. y Advertising ± is a paid. y A trademark signifies the brand name or symbol is registered and the business has exclusive right of use. y Price penetration ± occurs when a business charges the lowest price possible for a product or service so as to achieve a large market share. y A private or house brand is one that is owned by a retailer or wholesaler. PACKAGING y Packaging is the development of a container and the graphic design of the product. y Price lining ± is used mainly by retailers where a limited number or prices. y A brand name is that part of the brand that can be spoken. Pricing strategies include: y Price skimming ± involves charging the highest price possible for innovative products. Price refers to the amount of money a customer is prepared to offer in exchange for a product. design or any combination of these that identifies a specific product and distinguishes it from its competition. Promotion describes the methods used by a business to inform. are set for selected lines or groups of merchandise. BRANDING y A brand is a name. Ryan McDonald SHS 29 . an idea or any combination of the three that can be offered in an exchange.

Place or distribution are the methods through which a business distributes in products. 3. 4. y Warehousing ± the set of activities involved in receiving. Producer to agent to wholesaler to retailer to customer. Market coverage refers to the number of outlets a firm chooses for its product. Physical distribution is all those activities concerned with the efficient movement of the products from the producer to the customer. Channels or distribution or marketing channels are the routes taken to get the product from the factory to the customer.Business Studies Study Notes y y Publicity and public relations ± publicity is any free news story about a business¶s products. 3. Public relations are those activities aimed at creating and maintaining favorable relations between a business and its customers. The four most commonly used channels of distribution are: 1. Producer to retailer to customer. Ryan McDonald SHS 30 . storing and dispatching goods. y Inventory control ± a system that maintains quantities and varieties of products appropriate for the target market. Noise is any interference or distraction that affects and or all stages in the communication process. 2. 2. They are categorized into: y Transport ± the physical movement of products from producer to the retailer or customer. Intensive distribution ± this occurs when the business wishes to saturate the market with its product. Producer to wholesaler to retailer to customer. Producer to customer. This is relative to a business¶s intensity of coverage. An opinion leader is a person who influences others. A channel is any method used for carrying a message. Exclusive distribution ± this is the use of only one retail outlet for a product in a large geographic area. The three different intensities are: 1. Selective distribution ± this involves using only a moderate proportion of all possible outlets. Word of mouth communication occurs when people influence each other during conversations.

Methods used by companies to mislead consumers include: y Fine print y Before and after advertisements y Unsubstantiated tests and surveys y Country of origin y Packaging y Special offer y Bait and switch advertising Price discrimination is the setting of different prices for a product in separate market. controls prices in that market. Sugging. Monopolistic power occurs when only one business operates in a market and. They are categorized as: y Merchantable quality means that the product is of a standard a reasonable person would expect for the price. is a sales technique disguised as market research. Resale price maintenance occurs when the manufacturer or supplier insists that a retailer sell the product at a certain price. pricing. That is. therefore. promotion and distribution of products that either do not harm or have minimal impact upon the environment. or selling under the guise of a survey. Materialism is an individual¶s desire to constantly acquire possessions.Business Studies Study Notes Ethical and Legal Aspects Green marketing refers to the development. Ryan McDonald SHS 31 . A warranty is a promise by the business to repair or replace faulty products. y Fitness of purpose means that the product is suitable for the purpose for which it is being sold. Implied conditions or terms are the unspoken and unwritten terms of a contract. it will perform as the instructions or advertisement implies.

Business Studies Study Notes Ryan McDonald SHS 32 .

employees. statutes. awards. non-financial ‡ training and development ² induction ‡ flexible working conditions ² family-friendly programs ‡ measures of effectiveness ² levels of staff turnover. agreements ‡ types of employment contract ² casual/part-time/flexible. pickets. pluralist. population shifts ‡ legal influences ² overview of major employment legislation ‡ new organisational behavioural influences ² flat management and team structures ‡ economic influences ² economic cycle. work-to-rule Ryan McDonald SHS 33 . employer associations. government organisations ‡ managing the employment relations function ± line management and specialist key influences on employment relations ‡ social influences ² changing work patterns. permanent. team briefings ‡ rewards ² financial. radical ‡ types of industrial action ± overt ² lockouts. disputatio n. absenteeism. The focus of these case studies will be to: ‡ analyse how conflict and change are managed in a business ‡ prepare and justify possible ways of resolving conflicts in the selected business organisations. globalisation effective employment relations ‡ role of employment relations ‡ communications systems ² grievance procedures. working conditions. management policy. quality. strikes. benchmarking legal framework of employment ‡ the employment contract ² common law (rights and obligations of employers and employees). Students learn about: the nature of employment relations ‡ stakeholders in the employment relations process ² employers. bans.Business Studies Study Notes HSC Topic 4: Employment Relations Content Students learn to: use existing business case studies to investigate and communicate ideas and issues related to employment relations. unions. political goals and social issues ‡ perspectives on conflict ² unitary. worker participation. casual industrial conflict ‡ definition and causes ² wage demands.

exclusion from decision -making in business roles of stakeholders in resolving disputes dispute resolution processes ² conciliation. common law action. arbitration. turnover. mediation. social. Ryan McDonald SHS 34 .Business Studies Study Notes ‡ ‡ ‡ covert ² absenteeism. sabotage. negotiation. personal. business/division closure costs and benefits of industrial conflict ± financial. political. international ± ethical and legal aspects ‡ issues in the workplace ± working conditions ± Occupational Health and Safety (OH&S) ± workers¶ compensation ² state and/or federal agencies and common law redress ± anti-discrimination ± Equal Employment Opportunities (EEO) ± unfair dismissal. grievance procedures.

Business Studies Study Notes Nature of Employment Relations Employment relations refers to the total relationship between an employer and employee. The criteria are critical in determining legal dispute over the employment contract. The key stakeholders in the employment relations process (and their aims) are: y Governments o Workplace reform and higher productivity o International competitiveness o Compliance with legislation o Higher living standards and employment y Employees ± Trade Unions may represent employees o Better wages o Better working conditions o Meaningful jobs o Job security o Participation in decisions y Employers ± Employer Associations may represent employers o Increase profit o Increase flexibility o Minimise costs. may involve: y The location of the workplace y The way in which the work is performed y The degree of supervision involved. service manager or sales manager. A specialist employment relations manager is more commonly involved in: y Recruitment and selection y Induction and training y Separation y Managing the implementation of equal employment opportunity and affirmative action legislation Ryan McDonald SHS 35 . Control. An employer. for example. be competitive o Expand business o Develop new products o Maximise customer service A line manager is responsible for the management of staff contributing to the prime function of the business. a production manager. for legal purposes: y Exercises control over employees y Has responsibility for payment of wages y Holds the power to dismiss employees An employee is a worker under an employer¶s control.

Business Studies Study Notes Key Influences on Employment Relations The key influences on employment relations can be categorised into four main categories: y Social Influences o Changing Work Patterns  Casualisation of the work force  Flexible working hours  Rapid growth of outsourcing o Population Shifts  Increase in the female participation rate y Legal Influences o Overview of Major Employment Legislation  Equal employment opportunity  Anti-discrimination y New Organisation Behavioural Influences o Flatter management structures o Team Structures and Coalitions y Economic Influences o Economic Cycles o Globalisation Ryan McDonald SHS 36 .

Business Studies Study Notes Effective Employment Relations Effective employment relations systems involve a proactive. incentive payments. training. strategic approach to implementing a strategic plan developed with employees. due to: o Employees needing avenues to communicate problems and air conflicts o Employers needing a system to reprimand staff for unsatisfactory work or conduct y Worker participation o Joint consultative committees y Team Briefings o Quality circles o Semi-autonomous/self-managing work teams An effective rewards management system should attract. values the worth of each employee y Commitment to ongoing training and development y Flexible. Ryan McDonald SHS 37 . family friendly working conditions y Non-discriminatory environment The success of an employment relations system depends heavily on the strength of an organisations communications system. for example. motivation and separation strategies y Legal compliance o Equal Employment Opportunity o Occupational Health and Safety o Industrial Relations Legislation y Culture based on trust promotes collaboration and participation. This system includes: y Grievance procedures ± grievance procedures are formal procedures that an employer and employees have agreed to use to deal with issues or conflict in the workplace. The key principles of effective employment relations are: y Appropriate reward systems y Performance measurement systems y Common purpose including a focus on quality and customer service y Commitment to change supported from management y Human resources planning based on needs analysis linked to recruitment and selection. or non-monetary. work schedules. rewards. This is a two way process. Rewards can be classified as: y Intrinsic y Extrinsic Intrinsic rewards are those that the individual derives from the task or job itself. such as a sense of achievement. retain and motivate employees. They may be monetary. for example. Extrinsic rewards are those given or provided outside the job itself.

y Leave o Maternity leave. o Support on parental leave. The main strategies to achieve flexible working conditions include: y Flexible Working Hours y Job Sharing y Part-time work Family friendly programs can be classified into 6 main categories. o Relocation policies. These are: y Workplace Participation and Training o Increased multi-skilling to allow staff to ³fill-in´ for others. the organisation and its culture. This is achieved through induction programs. o Family days. o Work-family information. their cowworkers. o Family leave. o Staff meetings to discuss work-life issues. y Child Care o Employer-supported venture. o Work experience for children.Business Studies Study Notes Intrinsic y y y y y y y Extrinsic Environment Good policies and practices Effective leadership and/or supervision Good relationships with co-workers Safe and healthy work environment Fair treatment Club membership Social activities Recognition y y y y y y y Job Interesting work Challenge Responsibility Recognition Promotion Autonomy in job Sense of achievement y y y Direct Wages Salary Commissions Bonus plan Share plan Pay increase Gainsharing y y y y y y y y y y y y y y y y y y y Indirect Insurance Holidays Child care Medical care Employee assistance Flexible work schedules Free legal advice Personal loans at cheap rates Moving expenses Training expenses Time off Company car Parking space Discount purchases Training and development is designed to introduce new employees to the job. Flexible working conditions allow workers to balance work and family responsibilities more effectively. Ryan McDonald SHS 3 E . o Paternity leave. y Other o Flexible salary packages. such as school matching services.

o Job sharing. o Seminars o Respite care for elderly and disabled. o Employee assistance. decreasing or steady. o Flexible hours. o Reserved child care place. Family Support o Arrangement to check children.Business Studies Study Notes y y o Joint venture. y Benchmarking ± comparing a business¶s result with those of industry leaders. Flexible Working Arrangements o Part-time work. either as a whole or done by average. o Phone policy. o Variable full-time/part-time work. o Work from home. o Career breaks. o Vacation care programs. y Disputation ± the number of grievance procedures used in a given time-frame. o Supporting community service. o Advice/referral service. Ryan McDonald SHS 39 . o Sick children arrangements. The measures of effectiveness of a business¶s employment relations policies can be explored through: y Levels of staff turnover ± whether they are increasing. y Absenteeism ± the average number of days missed by employees.

Business Studies Study Notes Legal Framework of Employment An employment contract is a legally binding. formal agreement between employer and employee. they are not entitled to paid holiday or sick leave. The responsibilities of the employer include: y Providing work y Payment of income and expenses y Meeting requirements of industrial relations legislation o Anti-Discrimination o Equal Employment Opportunity y Duty of care o Occupational Health and Safety The responsibilities of the employee include: y Obey lawful and reasonable commands made by the employer y Use care and skill in the performance of their work activities y Act in good faith and in the interest of the employer Key Statutes include: y Racial Discrimination Act y Trade Practices Act y Workplace Relations Act y Industrial Relations Act Awards are legally binding documents. Ryan McDonald SHS 40 . irregular and uncertain. setting out minimum wages and conditions of employees in an industry or occupation. Awards are used as a benchmark for comparison with other agreements in a test of minimum wages and conditions. made by the Australian Industrial Relations Commission (AIRC). Casual employees are in employment that is short term.

with or without unions. sex. y Anti-Discrimination Boards ± work closely with the Human Rights and Equal Opportunity Commission to ensure that disputes about discrimination on the basis of age. y Pluralist ± this approach recognises the active roles played by unions and employer associations and the framework developed by the government. disagreements or dissatisfaction between individual stakeholders. and reflects the traditional view of an ³us versus them´. State Supreme Courts. such as employees and their employers. political opinion. Line managers are playing a much greater role today in resolving disputes. race or religion in the workplace are resolved through provision of information. on a collective or individual basis. y Employees ± use grievance procedures and negotiate agreements with employees. y Civil Courts ± Federal Court.Business Studies Study Notes Industrial Conflict Conflict refers to disputes. Industrial actions can be classified into two main types. Can refer cases to Administrative Review Tribunal for determination. y Radical ± this approach views conflict as inevitable. employers and associations. Provide conciliation and arbitration for the resolution of disputes and unfair dismissal claims. criminal record. due to a different in views on certain business policies. conflict based relationship between employer and employees. over and covert. work ³hand in hand´ to achieve shared goals. colour. y Industrial Tribunals (AIRC) ± interpret legislation. y Trade Unions ± represent employees in disputes from the shop floor to the national level. Make and supervise awards and agreements. as well as representing employees in tribunals. Enforce legislation and handle common law actions. disability. Ryan McDonald SHS 41 . negotiate with management. The main manifestations of these types of conflict are: Overt y y y y y y Employee Pickets Strikes Stop-work meetings Work bans Boycotts Work-to-rule y y y y Management Lockouts Stand-downs Dismissals Retrenchments y y y y y Covert Employee Absenteeism y High labour y turnover rates y Higher defect rates Reduced y productivity Lack of cooperation Management Discrimination Harassment Lack of cooperation Exclusion from decision making The main roles of the key stakeholders in resolving disputes are: y Employers and Managers ± use grievance procedures and negotiate agreements with employees to resolve disputes. investigation and conciliation. The key causes of industrial conflict are: y Wage demands y Working conditions y Political goals and social conditions y Management policy The 3 Main Perspectives on Conflict are: y Unitary ± this approach assumes stakeholders.

Arbitration ± decision is binding 5. Conciliation ± decision is NOT binding 4. assist in negotiations with unions. Grievance procedures 2. and reputation may be damaged Some firms may close of relocate Other businesses dependent on firms in dispute can be affected Families can suffer significant loss of wages Legal representation and fines imposed can be a financial burden on firms Stress can be created through intensification of work and changes due to restructuring of the workplace Rumours or threats of downsizing cause fear. policy and legislative framework for the resolution of conflict. Refers complaints of sex discrimination in awards and agreements for determination to the Federal Court. It can investigate and conciliate complaints about discrimination in employment opportunities or a person¶s treatment in the workplace. insecurity and lowering of staff morale Absenteeism. Common law action 7. employees or employers in industries where disputes affect the general public Verbal and physical abuse can occur Demonstrations can disrupt communities.Business Studies Study Notes y y y Human Right Commission ± monitors and reviews how legislation relating to human rights is implemented. and represent employers in tribunals. Governments ± provide the institutions. Business/Division closure Benefits and Costs of Industrial Conflict y y Financial y Benefits Increase empowerment of all parties who ³own an agreement´ Empowerment can lead to increased productivity. Mediation 6. Negotiation 3. The dispute resolution process is: 1. fewer disputes and reduced absenteeism and labour turnover Cost-cutting measures can lead to conflict but can ensure a firm¶s survival and competitiveness in the long term y y y y y y y Personal y Conflict helps workers to gain management¶s attention on major issues that may have caused dissatisfaction and stress for a long time Better work relationships may result from a clearer understanding of work problems Greater employee involvement and motivation may result from negotiated changes and improvements in training y y y y y y Social y y Ryan McDonald Jobs can be saved in some cases Employee and community welfare can be enhanced by changed work practices Introduction of multiskilling. accidents and defect rates can increase Working relationships may suffer as a result of conflict or methods used to resolve it Community bitterness can be directed at unions. new training opportunities and career paths benefit individuals and society Occupational health and safety problems may be reduced SHS y y y Costs Lost production and sales adversely affect a firm¶s income and levels of debt. Investigate breaches of legislation. and violence and 42 . Employer Associations ± provide information and support to employers.

This may present opportunities for international expansion y y injuries may occur in extreme cases Frequent and disruptive conflict has an impact on government or opposition policies.Business Studies Study Notes y y Political y Governments can change their policies in response to workplace conflict Disputes draw public attention to the need to protect worker entitlements Particular industries may be restructured to improve the economy y y y y International Changes to work practices following conflict can improve a business¶s international competitiveness. particularly at election times Bitterness between unions and government can lead to political conflict and large scale civil unrest Loss of national income in extended disputes can affect economic growth Loss of export income and markets can occur after periods of disruption The nation¶s reputation for stability can be lost and overseas customer or investors may turn elsewhere Ryan McDonald SHS 43 .

their work.Business Studies Study Notes Ethical and Legal Aspects Ethical business practices are those practices that are socially responsible. Ryan McDonald SHS 44 . An ethical employer can achieve safe and fair working conditions through: y Compliance with social justice and industrial legislation y Providing a safe and healthy working environment y Creating challenging. or related to. interesting and meaningful work y Improving communication and fostering teamwork y Implementing change through collaboration with staff y Offering flexible working hours and conditions The key legal aspect of employment relations are: y Occupational Health and Safety y Equal Employment Opportunities Workers compensation provides a range of benefits to an employee suffering from an injury or disease relating to their work. morally right and honorable and fair. It is also provided to families of injured employees when the injury/disease was caused by.

Students learn about: globalisation ‡ nature and trends ² growth of the global economy and changes in markets (financial/capital. The focus of these case studies will be to: ‡ select a global business and identify its international targets ‡ describe and analyse the reasons for its international expansion ‡ explain the influences on this business in the global market ‡ explain the strategies used by the business to achieve its targets. consumer) ‡ trends in global trade since World War II ‡ drivers of globalisation ± role of transnational corporations ± global consumers ± impact of technology ± role of government ± deregulation of financial markets ‡ interaction between global business and Australian domestic business global business strategy ‡ methods of international expansion ± export ± foreign direct investment ± relocation of production ± management contract ± licensing/franchises ‡ reasons for expansion ± increase sales/find new markets ± acquire resources and have access to technology ± diversification ± minimise competitive risk ± economies of scale ± cushioning economic cycle ± regulatory differences ± tax minimisation specific influences on global business ‡ financial Ryan McDonald SHS 45 . labour.Business Studies Study Notes HSC Topic 5: Global Business Content Students learn to: use existing business case studies to investigate and communicate ideas and issues related to global business.

make or buy) ± global web (components produced in different countries) ‡ employment relations ± organisational structure ± staffing ± shortage of skilled labour ± labour law variations ± minimum standards of labour ± ethnocentric/polycentric/geocentric staffing system ‡ evaluation ² strategies with reference to a particular global market ‡ modifications of strategies according to changes in global market management responsibility in a global environment Ryan McDonald SHS 46 .Business Studies Study Notes ‡ ‡ ‡ ± currency fluctuations ± interest rates ± overseas borrowing political ± tensions between protectionism and free trade ± international organisations and treaties (World Trade Organisation) ± trade agreements ± regionalism ± war and civil unrest legal ± contracts ± dispute resolution ± intellectual property social/cultural ± languages ± tastes ± religion ± varying business practices and ethics managing global business ‡ financial ± methods of payment ± credit risks ± hedging ± derivatives ± insurance ± obtaining finance ‡ marketing ± research of market ± global branding ± standardisation and differentiation ‡ operations ± sourcing (vertical integration.

Business Studies Study Notes ‡ ethical practice ² tax havens and transfer pricing ± minimum standards of labour ± dumping illegal products ± ecological sustainability. Ryan McDonald SHS 47 .

it is the total economic activity within and between countries. finance. networks and relationships are well established. technology. 3. technology. 2. It includes the flow of all trade. finance and labour. labour and investment. The Drivers of Globalisation can be classified as: y Deregulation of financial markets o Foreign Direct Investment (FDI) y Role of transnational corporations y Impact of technology y Global consumers y Role of government o Free Trade Agreements A transnational corporation (TNC) is any business that has productive activities in two or more countries and that operates on a worldwide scale. labour and consumers) refers to the combining of one separate and distinct national markets into one huge marketplace. assets or property outside a business¶s home country. Some of the global influences on the Australian business environment are: y Increasing globalisation and a changing international business environment. therefore. Australian businesses have three specific advantages during the transition towards a truly global economy. Foreign Direct Investment (FDI) is investment made for the purpose of actively controlling companies. Globalisation is the movement across nations of trade. Many of the TNC¶s that operate in Australia have done so since the 1960¶s and. Consequently. The globalisation of markets (finance/capital. y An increasing trend by Australian businesses towards the establishment of overseas operations. These are: 1. Ryan McDonald SHS 4 F . financial assistance and contacts to encourage export-oriented businesses. Governments and numerous consultants provide advice. As globalisation continues. investment. labour and consumer products between countries will increase as these markets undergo structural change.Business Studies Study Notes Globalisation The global economy is the world economy and refers to the economic activity going on in the world. y Changes in protection policies. The multicultural make-up of the Australian workplace provides personnel with language skills and people who understand and appreciate cultural differences. flows of finance. Merchandise exports are domestically made products sold to customers in another country. Globalisation of production refers to the practice of many businesses to purchase their inputs from around the globe as well as the tendency to manufacture components in low cost locations.

Ryan McDonald SHS 49 . y The parent business is exposed to economic uncertainties of the foreign country. up-to-date facilities can be constructed. A joint venture means two or more businesses agree to work together and form a jointly owned but separate business. Relocation of production occurs when the domestic production facility is closed down and then set up in a foreign country. The Disadvantages of Relocation of Production are: y The parent business may be faced with social. The acquisition strategy occurs when one business acquires. intermediary or final consumer in another country. y The parent business is in a better position to be able to monitor and adapt to changes in the foreign country¶s business environment. products and intellectual property becomes easier. y Adverse currency fluctuations may wipe out cost efficiencies. y Decreased productions costs may result in increased profits. y More modern. The 3 Different Types of Exporting are: 1. 3. Intracorporate exporting is the selling of a product by a firm in one country to a subsidiary firm in another. y As the products are being produced in the overseas country there is a subsequent reduction in transport costs. Direct exporting happens when the exporting business sells its products to an agent.Business Studies Study Notes Global Business Strategy Exporting occurs when a business manufactures its products in its home country and then sells them in foreign markets. The 3 Methods of Foreign Direct Investment are: 1. cultural and language barriers may create problems. cultural and language barriers in the overseas country. The Advantages of Foreign Direct Investment are: y It provides the parent business with direct control over the foreign facilities. Indirect exporting is the most basic level. people. an existing business already operating in a foreign country. y Legal. A business sells its products to a domestic customer who then exports the product. The Disadvantages of Foreign Direct Investment are: y Increased financial risk is likely. The greenfield strategy involves commencing a new business venture from scratch. y The possibility of a consumer backlash if exploitative work practices are used. 2. The main advantages of this strategy include: y Moving to a low-cost labour country should help decrease costs of production. social. y Joint venture profits must be shared between all the parties involved. y Some governments provide financial assistance to cover relocation costs. through a takeover or merger. 3. adding to other cost efficiencies. y Transfer of technology. especially when investing in a business that is located in a politically unstable country. 2.

y The global business may face political pressures from the host business¶s government. Licensing is an agreement in which one business (licensor) permits another (licensee) to produce and market its product. y Fewer government regulations. The business may be perceived as foreign and no longer a local business. Diversification is process of spreading the risks encountered by a business. In comparison. franchising is a specialized form of licensing in which the franchisor grants the franchisee the right to use a company¶s trademark and distribute its product. which may result in some consumers being reluctant to purchase the products. y Supplier diversification ± counteract price increases. y International franchising is more complex than domestic franchising. Diversification can occur at a number of different levels. y Diversification. y The global business is able to earn extra revenue. y Minimise the risk of competition. The reasons for global business expansion include: y Increasing sales and finding new markets. y The fees paid by the subsidiary are a business expense. y Cushioning economic cycles. Ryan McDonald SHS 50 . y Exploiting economies of scale. y Acquiring resources and technology. especially with regard to foreign exchange restrictions. The management contract is an arrangement under which a global business provides managerial assistance and technical expertise to a second host business for a fee.Business Studies Study Notes y y The business needs to recruit a local workforce and train it to meet its standards. This could be time consuming and expensive. y Product diversification ± expansion of product lines. These include: y Geographic diversification ± operating in foreign locations. The advantages of this include: y The global partner has greater control over production standards in a joint venture operation. y It is a useful option for forms lacking the capital to develop an overseas operation. y The licensor/franchisor is able to develop a global presence relatively quickly. y The profits are shared between the two parties. y Tax minimization. The Disadvantages of Management Contracts include: y The host business does not gain any managerial training. and are therefore a tax deduction. The main advantages of licensing and franchising are: y There is little financial risk for the licensor/franchisor. often requiring the need for extensive legal advice. The Disadvantages of Licensing/Franchising include: y It is difficult to maintain quality control over a wide range of locations.

Business Studies Study Notes Economies of scale refers to the reduction in costs of production that arise from increasing the size or scale of the production facility and spreading overhead (fixed) costs over a larger output. Ryan McDonald SHS 51 . A tax holiday occurs when no tax is paid for a certain period of time. A tax haven is a country that imposes little or no taxes on business income.

Social and Cultural Influences include: y Languages y Tastes y Religion y Varying Business Practices and Ethics Ryan McDonald SHS 52 . Financial Influences include: y Currency Fluctuations o Exchange rates y Interest Rates y Overseas Borrowing ± The two main sources of international finance are: o International Equity (Share) Market o International Bond Market Political Influences include: y Tension between protectionism and free trade y International Organisations and Treaties ± the main organisations are: o World Bank ± (WB) o International Monetary Fund ± (IMF) o Bank for International Settlement ± (BIS) o World Trade Organisation ± (WTO) y Trade Agreements ± the main trading agreements are: o North American Free Trade Agreement ± (NAFTA) o Association of South-East Asian Nations ± (ASEAN) o Asia-Pacific Economic Cooperation ± (APEC) y Regionalism ± the main trading bloc is: o European Union ± (EU) y War and Civil Unrest Legal Influences include: y Contracts y Dispute Resolutions ± including: o Which country¶s legal system applies? o In which country should the dispute be settled? o How will the final decision be enforced? y Intellectual Property ± treaties protecting intellectual property rights include: o International Convention for the Protection of Industrial Property. o Universal Copyright Convention. y Cultural differences.Business Studies Study Notes Specific Influences on Global Business A business that operates globally has to deal with a more complex set of factors compared to a business that operates only in a domestic market. including: y Difficulty of assessment. y Different value systems. y Decision making is more complex. o Berne Convention for the Protection of Literary and Artistic Works.

term. y Options Contract ± this gives the buyer the right. These are: y Forward Exchange Contract ± this is a contract to exchange one currency for another currency at an agreed exchange rate on a future date. to buy or sell foreign currency at some time in the future. the importer may collect the goods BEFORE paying for them. Hedging helps to reduce the level of uncertainty involved with international financial transactions. Hedging is the process of minimizing the risk of currency fluctuations. 2. y Document Against Acceptance ± using this method.Business Studies Study Notes Managing Global Business The 5 basic methods of payment a business can select are: 1. but not the obligation. usually after a period of 30. 5. the exporter before the goods are transported. Letter of Credit ± this is a commitment by the importers bank. Payment in Advance ± this method allows the exporter to receive payment and then arrange for the goods to be sent. 4. y Currency Swap ± this is an agreement to exchange currency in the spot market with an agreement to reverse the transaction in the future. rail and air as well as sea. 90 or 180 days. which promises to pay the exporter a specified amount when the documents proving shipment of the goods are presented. y Standardisation and Differentiation ± these can be defined as: Ryan McDonald SHS 53 . y Currency risk insurance ± protecting the exporter from losses due to currency fluctuations. Finance can be obtained through: y Domestic Capital Markets y International Capital Markets y Eurocurrency Markets Marketing involves: y Research of Market y Global Branding ± this is the worldwide use of a name. Open Credit ± this allows the importer access to the goods with a promise to repay at a later date. The main types of Insurance available to businesses are: y Marine insurance ± covering shipment by road. symbol or logo to identify products of one seller and differentiate them from those of the competitor. 3. but not received by. Derivatives can be divided into three main types for exporters. The two types of bill of exchange are: y Document Against Payment ± using this method. the importer can collect the goods ONLY after paying for them. Bill of Exchange ± this is a document drawn up by the exporter demanding payment from the importer at a specified time. Clean Payment ± occurs when the payment is sent to. y Product liability insurance ± protecting the manufacturer and exporter from liability due to damage caused by the use of a product.

An ethnocentric approach to staffing is one in which all key management positions at all company locations are filled by parent company personnel A polycentric approach to staffing is one in which personnel from the host country manage the subsidiaries.Business Studies Study Notes o A standardized approach is an international marketing strategy the assumes the way the product is used and the needs it satisfies are the same all over the world. Ryan McDonald SHS 54 . each specializing in the part of the production process it can most efficiently perform. This can be simply defined as ³make or buy´. o A differentiated approach is an international marketing strategy that assumes the way the product is used and the needs it satisfies are different between countries. irrespective of nationality. while the parent company personnel fill the key roles at company headquarters. A geocentric approach to staffing means seeking the best people for key jobs throughout the entire organisation. y Global Web ± this is a network of production sites located around the world. Operations involves: y Sourcing ± the acquisition of a business¶s products and materials. Employment Relations involves: y Organisation Structure y Staffing y Shortage of Skilled Labour y Labour Law Variations y Minimum Standards of Labour y Staffing Systems ± as defined below.

lacks the ability to pursue social goals. a business can turn today¶s problems into future profits. It is better to selfregulate than have governments force companies to comply with certain standards. subcontractors or others in the production chain. Therefore. Isle of Man and Monaco. With their base financial. o Examples include Hong King. Ryan McDonald SHS 55 . Liechtenstein. Panama and Liberia. Economic inefficiencies could result if managers are forced to undertake an extra role. Transfer Pricing refers to the prices one subsidiary of a company charges a second subsidiary for goods and services. or those of its suppliers. y Tax Shelter o Tax may be levied on some internal transactions. Providing the best quality products at the lowest price should be the goal of all businesses because this benefits society. o Low rates on tax on profits from internal sources.Business Studies Study Notes Management Responsibility in a Global Environment Tax Havens can be classified into three different types. Business managers are appointed. they have certain social rights and responsibilities. Businesses are unavoidably involved in social y issues. y y y y Businesses have the resources to help solve complex social problems. Bahamas. technical and human resources businesses can play a positive role. Maximising profits ensures that society¶s resources are sued efficiently. These are: y Tax Paradise o No relevant company income tax. o Examples include Cayman Islands. y Tax Privilege o To tax for some types of business. Bermuda and Vanuatu. Therefore they are not accountable to society. By adopting a philosophy of enlightened self-interest. y Against A business is essentially an economic organisation which. o Examples include Channel Islands. Luxembourg. Labour standards refer to the conditions that affect a business¶s employees. not elected. therefore. Two other key environmental factors facing global businesses are: y Ecological Sustainability y Dumping Illegal Products Arguments for and Against Corporate Social and Ethical Responsibility include: For A better society means a better environment y for doing business. Corporate social action will prevent government regulation.

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