Professional Documents
Culture Documents
Cost leadership
Involves producing goods or services at the lowest possible cost. If
a business can keep its costs low then it will maximise its profits
giving the business a competitive advantage over its competitors.
Good/service differentiation
By differentiating its good/services a business will make its output
stand out from its competitors and therefore capture greater
market share.
Influences on operations
There are seven major influences on operations:
Globalisation - Globalisation is known as the increasing
economic and financial integration of economies globally.
The term broadly refers to the global alterations that are
taking place to eliminate national boundaries from the key
business functions.
Technology Technology has also had a great influence
on production. Businesses must access the latest technology
in order to compete effectively. Newer technology makes the
production process cheaper and more efficient. Recent
technologies include robotics, computer assembly lines,
computer aided design (CAD), computer aided
manufacturing (CAM), scanning systems and barcoding,
wireless computer systems and superfast broadband and
smart phones and satellite navigation.
Operations process
Inputs
Transformed resources
Materials These are the raw materials used in the
production process
Information This is used by a business in order to help
transform the raw materials into finished products. Market
research information may help the business to target their
customers more precisely. This information is then used
(transformed) to help the business with its production
decisions.
Customers These people purchase the finished product
after all of the other inputs have been put together. Ideally
they will have some influence over what is produced.
Transforming resources
Human resources This could also be referred to as
Transformation processes
This is the actual process of converting inputs into outputs. Take
the ingredients for making bred and putting them all together to
produce a loaf of bread. To carry out this transformation there is a
physical change a loaf of bread looks and tastes different to the
parts that made it up.
Gaant charts, Critical path analysis is the shortest time a job can
be completed but the longest path.
Outputs
The final stage of the operations process is outputs. This could be
regarded as the most important stage of the process because
without customer service and warranties, all of our hard work
producing a good product will mean very little if the customer who
buys the final product is not satisfied.
Warranties
Operations strategies
Performance objectives
Performance objectives can sometimes be called quality control
and these are the management procedures that are put in place to
check the suitability of raw materials going into to production
process. It also helps avoid producing seconds, wastage, increased
costs, warranty claims and service problems. The performance
objectives are:
Logistics
E-commerce
Global sourcing
Outsourcing
Recently there has been a trend for businesses of all sizes to
outsource much of their work in order to access the best talent
available and also as a matter of economics. For example, There
are many companies contracting out their manufacturing
processes to contractors all around the world who assemble the
components and then sell them under a brand name. Apple
doesnt assemble its own computers but instead contracts out its
computer assembly functions.
Technology
Leading edge
Businesses need to use state of the art technology as part of their
operations strategies. Computerisation has lead to the
technological revolution in business through such things as
computer aided design (CAD) and the robotisation of production.
New information and communications technologies are major
influences on business both domestically and globally. The
internet, mobile phones and electronic funds transfer are opening
up the global market.
Established
As we move through the 21st century we also need to consider
some of the established technology that we take for granted and
which has been around for a while now and yet on the other hand
was not always common 20 years ago. These include:
Fax machines
ATMs
Photo copiers/scanners
Barcoding of stock
Inventory management
In todays world, businesses must decide how much stock they
hold at any one time. On one hand if too much stock is held then
money is tied up reducing liquidity. On the other hand if too little
stock is held the business runs the risk of running out of stock if
the supplier has a problem at their end. There is no clear answer
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to this dilemma and the business must decide on the best plan for
their particular business. It comes down to experience and also gut
feeling.
JIT
Quality management
Quality management refers to the degree of entrepreneurial flair,
innovative skills, experience, people management skills, decision
making skills and communication skills that a manager has.
Control
Control helps to check errors and to take corrective action to
maintain standards. Things that need to be controlled include
inventory especially the amount of inventory the business has on
hand.
Assurance
When we say assurance we mean quality assurance. It is the
overseeing of the whole process.
Improvement
By this we mean continuous improvement because without
continuous improvement a business will not maintain its edge over
its competitors and will fall behind.
Global factors
The global business of today is living in a completely different
world to that of global business 20 years ago and the main
element in this change is technology. Global factors are:
Global sourcing The term used to describe the practice of
sourcing raw materials and services from the global market
across geopolitical boundaries.
Economies of scale This is the lowering of the unit cost of
production by spreading costs over a larger output. As
companies become larger and begin to trade overseas,
many will set up offices, research and production facilities
overseas, taking advantage of the fact that they can access
information and technology not always available in Australia.
Scanning and learning This is a process of gathering,
analyzing and dispensing business information for tactical
(short term) and strategic (long term) purposes. A business
has to monitor (scan) key factors such as demographiceconomic, technological, political-legal and social-cultural
factors that may affect their business.
Research and development Refers to creative work
undertaken on a systematic basis in order to increase the
stock of knowledge, including knowledge of man, culture &
society and the use of this knowledge to devise new
applications. Businesses must undertake in research and
development to stay at the forefront of world production
development.
Topic 2: MARKETING
The role of marketing
The strategic role of marketing
Strategic plans have a 3-5 year perspective. The marketing
strategy must fit in with the other elements of the business plan
and be interdependent with other key business functions. The role
of marketing is:
Maximise sales and therefore consumption and profits
Increase market penetration and market share
Maximise consumer choice
Maximise consumer satisfaction
Types of markets
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Influences on marketing
Factors influencing customer choice
Psychological:
Attitudes
Perceived status of the product to the consumer
Personality
Socio-cultural:
Family
Peer group
Social class
Economic:
Economic conditions (boom or recession)
Level of income and savings
Ability to borrow
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Government:
Consumer laws
Ethical aspects
Truth Truth in advertising has become an important aspect of
Marketing process
Situational analysis
Industry knowledge
New software
Weaknesses
Limited resources
Opportunities
Growing industry
Growing economy
Development of infrastructure
Threats
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Market research
Market research is defined as the systematic collection and
analysis of information and findings relating to a marketing
situation faced by a company. There are two types of research and
they are:
Primary research Involves collecting raw data from
scratch. They gather this data through surveys, discussion
groups, observations and experiments.
Secondary research Data that is already in existence and
usually collected by someone else for some other purpose.
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Marketing strategies
Market segmentation
Types of market segmentation:
Geographic
Demographic
Behavioural
Psychographic
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Processes
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Physical evidence
E-marketing
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Global marketing
Global branding
Standardisation
Customisation
Global pricing
Competitive positioning
Many businesses operate beyond domestic operations providing
the business with an opportunity to increase sales, further their
brand awareness and establish markets in new countries. Many
Transnational corporations (TNC) adopt a global marketing
approach that involves developing marketing strategies as if the
entire globe were one large target market - a standardised
approach.
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Topic 3: FINANCE
The role of financial management
The strategic role of financial management
When we think of strategic we think of long term (3-5 years). So in
this sense we are thinking of long term financial management or
where the business will be in 3 5 years in terms of its finances.
Finance manager:
Cash management
Accounting
Complying with legal regulations
Budgeting for future needs
Raising finance
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Influences on financial
management
Internal sources of finance
Internal funds are those funds provided to the business by its
owners and are in the form of retained profits.
Retained profits
Profits retained by the business and which have not been
distributed to the owners/shareholders in the form of dividends.
Shareholders receive dividends from the net profit after tax has
been deducted.
About half of the profits of a business are usually retained in order
to continue the operations of a business or purchase new capital
equipment, although this will vary according to the circumstances
and size of the business.
Long term
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External (equity)
Ordinary shares
New issuesIPO (Initial Public Offering)
1 Issue a Prospectus (everything you need to know about a
business)
2 Sell shares on the ASX
Rights issuesAfter the IPO
- Existing shareholders get to buy more shares
- More shares at a special price
PlacementsPrivately selling shares (not through an IPO)
Share purchase plansShareholders can choose to get shares
instead of dividends.
Private equity
There are 'private equity' firms (businesses) that buy other
businesses (e.g. JP Morgan Chase)
Advantages:
Financial institutions
Banks
Banks are the major operations in financial markets and are the
most important source of funds for businesses. Banks receive
savings as deposits from individuals, businesses and governments,
and, in turn, make investments and loans to borrowers. The four
major banks of Australia are the Commonwealth bank, Westpac,
ANZ and NAB.
Investment banks
Investment banks provide services in both borrowing and lending
(debt and equity), primarily to the business sector (short and long
term). Eg. Macquarie bank
Investment banks:
Finance companies
Provide loans to businesses and individuals through consumer
hire-purchase loans, personal loans and secured loans to
businesses.
ASX
Where 'securities' (shares) and bought and sold. The ASX offers
products and services that include:
Shares
Futures
Warrants
Influence of government
What the government does will influence the financial decisions that a
business makes.
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Prison
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Over the life of the loan, interest rates may rise, causing
repayments to increase, leading to increased gearing and
financial risk
Income statements
This report is used to help the business to calculate how much
profit it has made over a period of time by showing profits or
losses, expenses and income.
Balance sheets
This shows the value of assets, value of liabilities and owners
equity balances at a certain point in time. It is called s balance
sheet because at that point of time assets are equal to liabilities
and owners equity.
Financial ratios
Liquidity
Gearing
Debt to equity ratio= total liabilities divided by total equity
Profitability
Gross profit ratio = gross profit divided by sales (revenue)
Net profit ratio = net profit divided by sales (revenue)
Return on equity ratio = Net profit divided by total equity
Efficiency
Expense ratio = expenses divided by sales
Accounts receivable turnover ratio = credit sales divided by
Accounts receivable divided by 365
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a glance, the receipts and payments the business has made for
any given month
Distribution of payments
Cash
Receivables
Inventories
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Accounts payable
Loans
Overdrafts
Leasing
Profitability management
Profitability management involves the control of both the
business's costs and its revenue. Accurate and up to date financial
data and reports are essential tools for effective profitability
management.
COST CONTROLS
Fixed and variable costs
Before a business can control its costs, management must have a
clear understanding of what those costs are. Businesses generally
have fixed costs and variable costs.
Fixed costs are not dependent on the level of operating activity in
a business. Fixed costs do not change when the level of activity
changes - they must be paid regardless of what happens in the
business.
Variable costs are those that change proportionately with the level
of operating activity in a business.
Monitoring the levels of both fixed and variable costs is important
in a business. Changes in the volume of activity need to be
managed in terms of the associated changes in cost. Comparisons
of costs with budgets, standards and previous periods ensure that
costs are minimised and profits maximised.
Cost centres
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Expense minimisation
Profits can be weakened if the expenses of a business are high, as
they consume valuable resources within a business. Guidelines
and policies should be established to encourage staff to minimise
expenses where possible. Savings can be substantial if people take
a critical look at costs and eliminate waste and unnecessary
spending.
REVENUE CONTROLS
Revenue is the income earned from the main activity of a
business. For most businesses, revenue comes from sales or, in
the case of a service business, from fees for professional services
or commission.
Marketing objectives
Sales objectives must be pitched at a level of sales that will cover
costs, both fixed and variable, and result in a profit. A cost-volume
profit analysis can determine the level of revenue sufficient for a
business to cover its fixed and variable costs to breakeven, and
predict the effect on profit of changes in the level of activity.
Interest rates
Whether borrowing money domestically or internationally, the cost
of borrowing is interest. High interest rates will attract foreign
funds into Australia for investment purposes, increase the demand
for Australian dollars and therefore push up its value. It will also
have the effect of reducing demand for Australian exports because
of the increased value of the dollar. Likewise, low interest rates will
divert foreign funds from Australia, reduce the demand for the
Australian dollar and depreciate its value.
Methods of payment
There are four main methods of international payment, which are
all accompanied by different levels of risk for both importers and
exporters.
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Hedging
If an Australian business orders goods from an American company,
deliverable in 12 months time and the value of the Australian
dollar fall against the currency of the country from where the
goods are being made, then the Australian business will have to
pay more for those goods when they are delivered.
Now, it could very well be that the Australian dollar rises against
the U.S dollar during the year, in which case the Australian
borrower pays less than they expected.
Derivatives
Derivatives are international financial instruments for spreading
risk or hedging. They include futures, options, swaps and forward
contracts. For example, an Australian investor purchasing shares
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Outsourcing
Human resource functions
Outsourcing is a situation whereby a business contracts certain
work out to professionals such as lawyers and accountants.
Businesses of all sizes and functions outsource. Many people think
that only small businesses outsource because they are not big
enough to have a human resources department, an IT department,
a publications department and an operations department etc. This
is clearly not the case large businesses outsource as well.
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Key influences
Stakeholders
Employers and employees
Employers or management is the group of people who own and
manage a business. Employers goals are to produce goods and
services, make a profit, expand and increase market share.
Employers pay their employees in return for their work they do in
the business.
Society
Contract of Service
It is a legally binding, formal agreement between employer
and employee.
A written contract gives more protection to both parties than
a verbal contract, as disputes often occur over contracts if
working arrangements are not clean and it is one persons
word against another.
A written contract also encourages the parties to clarify the
key duties and responsibilities of a job.
Common law
Employers and employees have certain rights and obligations to
each other under common law. These rights and obligations have
been identified by the court system as legal standards of
behaviour.
EMPLOYERS:
Pay correct wages
Forward PAYG tax to the ATO
Must make superannuation contributions
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Statute
These take priority over common law. The Fair Work Act is the
current statute law.
Minimum employment standards employers and
employees agree to a rate of pay that is less than the
applicable minimal wage. This is reviewed each financial
year.
Economic
The state of the economy, particularly as it impacts on the viability
of business and business expectations and investment. Unions are
not as active during times of recession as they are during times of
economic growth. Key economic variables having an impact on
human resources and employment relations are:
The level of wage increases meaning fewer people are hired
Attitudes to downsizing and job cutting
The capacity of the employer to pay
International competition which may not give the employer
confidence to hire employees
Government funding which may or may not support
employers taking on new workers such as apprentices and/or
old workers
The productivity of labour, when technology is increasing
and likely to replace labour with machines or computers
Technological
The influences of technology has been one of the most discussed
areas when it comes to human resources because the assumption
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business because
staffs are the most valuable resource a
business has. If the correct staff are not acquired then a good deal
of time and money will be wasted in terms of inefficient production
and the time and the cost of acquiring new staff to replace the
ones that have been let go. For acquisition the business needs to
be able to identify staff needs, recruit suitable applicants with the
expertise and appropriate skills to complete the job and then
select the best possible candidate. A selection panel is
established: culling of the applicants, notifying the selected
applicants of an interview, selecting successful applicant
selection process. Some recruitment processes may involve
written tests and medical examinations.
Development
- Development has four strands:
Induction: familiarising the employees with the workplace
(corporate, culture, customer service, WHS, Equal
Employment Opportunity, record keeping etc.)
Performance appraisal: evaluating the performance
of employees and is usually conducted by employees
supervisor. Outcomes include promotion, an increase in pay,
improvement programs or termination.
Training: involves educating an employee in the skills and
processes of the job. It could be in-house, online or off site.
Development: involves selecting workers for educational
programs to focus on roles they aspire to in the future.
Maintenance
The concept of maintenance can cover several areas including:
A safe working environment
Job satisfaction
Job security
Good working conditions and pay
Career path
Social justice in the work place
Monetary benefits include: wages (based on hourly rates) and
salaries (annual rate of pay). May be paid according to sales
(commission), based on output, as bonuses, fringe benefits
(company car, phone, discounted purchases) etc.
Non-monetary benefits include: greater job variety, flexible
working hours, allowed to manage yourself and intrinsic rewards
(job satisfaction, good inner feeling about work) etc.
Separation
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Job design
Job design is a work arrangement aimed at reducing or overcoming
job dissatisfaction arising from repetitive and mechanical tasks.
Through job design, organisations try to raise productivity levels
by offering non-monetary rewards such as greater satisfaction
from a sense of personal achievement in meeting the increased
challenge and responsibility of ones work. Job enlargement, job
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Recruitment
It is in the area of recruitment that the human resources manager
is seen to have the highest profile. This is because it is the human
resource manager is doing the actual recruiting even though it
may be senior management that sets the parameters of what is
required. However the human resource manager will have acted in
an advisory capacity with regard to the requirements of the
position and type of person who would be best suited for the
position.
In all cases, the factors influencing the recruiting effort involve:
Identifying the need to fill a position
Preparing a job description and requirements of the job
qualifications, experience, skills, personality
Internal sources of recruitment are through promotion or transfer.
External sources of recruitment are from referrals, walk-ins,
agencies, schools and trade unions. External recruitment is carried
out through the mediums of television, radio, newspapers, trade
journals, computer services and through companies merging or
being taken over.
In terms of general and specific skills, the cost of recruitment and
selection will vary according to the level of position that is to be
filled.
Performance management
Performance management or appraisal is the process of assessing
the performance of employees against actual results and
expectations of the manager. Performance management can focus
on the performance of an organisation, a department or employee.
If people are motivated then they are more likely to be more
satisfied in their jobs and perform at a much higher level. Job
satisfaction occurs when people feel relaxed and happy in the job
they are in. A major function of this job satisfaction is the
employees working environment. Some of the conditions leading
to job satisfaction are:
Mentally challenging work
Personal interest in the work
Reward and performance
Work which is not too physically tiring
Pleasant working conditions
Training and development and opportunities for promotion
Part of making a job more satisfying is the concept of job
retrenchment, which is in any way of making a job more
meaningful and personally rewarding.
In order to work efficiently and to assist in motivation, the
employee needs to have regular feedback on the job that they are
doing.
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Workplace disputes
When a disagreement occurs and talks between management and
unions/employees break down, then a conflict or dispute exists.
The Australian Bureau of Statistics categorises the causes of
industrial disputes into eight broad groups:
Wage demands
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Management policy
Working conditions
Political goals
Social issues
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