H SC Business

MALIA CRAWFORD
BUSINESS STUDIES HSC TOPIC 1
OPERATIONS
ROLE OF OPERATIONS
• Introduction
• Strategic role of operations management – cost leadership
• Goods and/or services in different industries
• Interdependence with other key business functions
INTRODUCTION
o Operations refers to the business processes that
involve transformation or, more generally,
'production'.
o Transformation is the conversion of inputs
(resources) into outputs (goods & services).
o Operations and the customer focus

o Waste minimal resources in their
production (eg. Walmart)
o Reflect fair value for any labour used in
processes (eg. Fairtrade)
o Operate at low cost so as to maximise
affordability (eg. Jetstar)
o Reflect changes in the needs of
consumers over time (eg. Uber Eats)
STRATEGIC ROLE OF OPERATIONS MANAGEMENT

o Strategic means ‘affecting all key business areas’ – any business function contributing to the overall
strategic direction/plan of the business.
o Objectives: operating on minimal costs and maximising market share.
o Strategies: cost leadership, and product differentiation.
o Cost leadership involves aiming to have lower costs or to be the most price-competitive in the market,
while still being profitable.
o ‘… if inventory is not continually moving then the cost is increasing’
o Economies of scale: cost advantages that can be created as a result of an increase in scale of
business operations. Purchasing stock in bulk, and improved use of technology and machinery.
o Cross docking describes a process whereby stock from suppliers is transferred to distributors
without the need for holding in between, in a warehouse. Reduces inventory management costs.
o Goods and services differentiation means distinguishing products in some way from those of
competitors. It can be done by:
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Goods Services
Varying the actual product features Varying the amount of time spent
Varying product quality Varying the level of expertise
Varying any augmented features Varying the quality of materials or technology
o Cross branding approach adds value to products by offering consumers added benefits from a
cross-branding arrangement. Eg. (Coles-Shell).
GOODS/SERVICES IN DIFFERENT INDUSTRIES

o GOODS
o Standardised goods are those that are mass produced, usually on an assembly line. Uniform in
quality and produced with production focus.
o Customised goods are those that are varied according to the needs of customers. Produced with a
market focus, rather than production focus.
o Perishable goods have only a short life span as they are consumed quickly. Relatively inexpensive
and bought on a regular basis. Operational processes must have high quality standards, very short
lead times, and appropriate packaging to accompany this.
o Non-perishable goods are more durable and so operations must consider quality and inventory
management more carefully. They must manage all aspects of quality, and implement effective
inventory management strategies and be highly responsive to market demand.
o Intermediate goods are those that may be processed more than once, becoming inputs for further
processing.
o SERVICES
o Standardised vs Customised. (McDonald’s vs doctor)
o Self – service means encouraging the customers to take the initiative to help themselves. In this
way, businesses can concentrate on customisation when a person cannot help themselves.
o Drip pricing: a business advertises one price but in the process of a customer purchasing
the service numerous additional charges and costs are added.(eg. airline ticketing)
INTERDEPENDENCE WITH OTHER KEY BUSINESS FUNCTIONS

o Operations + Marketing
o The requirement of product design (a marketing responsibility) directly affects the sourcing or
production of products (operations).
o Operations + Finance
o If costs of production (operations) can be minimised then profit margins (financial objective) can
be increased. If products have high quality (operations), then can generate higher revenue.
o Operations + Human Resources
o New technologies (operations) are changing the way work is done, directly affecting human
resources within a business. Outsourcing (operations) directly shapes the skills and qualities
required of human resources.
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INFLUENCES ON OPERATIONS
• Main influences on operations management
• Globalisation, technology, quality expectations, cost-based competition,
government policies, legal regulation, environmental sustainability
• Corporate social responsibility
• The difference between legal compliance and ethical responsibility
• Environmental sustainability and social responsibility
MAIN INFLUENCES ON OPERATIONS MANAGEMENT

o Globalisation
o The removal of barriers of trade between nations. Increasing degree of transfer of capital, labour,
intellectual ideas, financial resources and technology.
o Provides a source of market opportunities for businesses, but can also act as a threat as high
competition using cost leadership to undercut market. Generally, it requires standardisation of
products to maintain customer expectations.
o Supply chain management refers to the range of suppliers a business has and the nature of its
relationship with those suppliers. A business needs a very predictable, reliable and flexible
supply chain. Businesses aim to minimise cost and risk, and maximise quality and timing in
suppliers.
o Technology
o The design, construction and/or application of innovative devices, methods and machinery upon
operations processes.
o Planning technologies: Gantt charts, Critical path analysis, spreadsheets, graphing programs
o Office technologies: computers, scanners, printers, fax, phone, hand-held organisers.
o Operations processes: manufacturing machines, robotics, CAD, CAM, rapid manufacturing (RM)
o Quality Expectations
o Quality: ‘the totality of features and characteristics of goods and services that bears its ability to
satisfy stated or implied needs’
o How well designed, made and functional goods are, and the overall degree of competence with
which services are organised and delivered.
o Goods: quality of design, fitness for purpose, durability.
o Services: professionalism of provider, reliability, level of customisation
o Cost-based competition
o When businesses bring a cost leadership approach to operations. Focus on reducing costs by:
o Achieving economies of o Standardising products
scale o Using automated production systems
o Eliminating waste
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o Government policies
o Government policies change from time to time, usually due to change in government or change in
social expectations.
o Eg. carbon tax policy – could influence business practices to minimise creation of carbon.
o Legal regulation
o The range of laws with which a business must comply are collectively termed ‘compliance’. Must
be followed at the risk of penalty.
o Operations: WHS regulations, T&D, fair work, anti-discrimination laws, environmental protection.
o Environmental sustainability
o Business operations should be shaped around practices that consume resources today without
compromising access to those resources for future generations.
o Sustainable use of renewable resources and reduction of use of non-renewable resources.
o Eg. reduce waste, recycle water, glass, paper and metals, reduce carbon footprint.
CORPORATE SOCIAL RESPONSIBILITY

o Refers to open and accountable business actions based on respect for people, community and the broader
environment. It involves businesses doing more than just complying with the laws and regulations.
o The difference between legal compliance and ethical responsibility
o Ethical behaviour involves making decisions that are not only legally correct but also morally
correct.
o In Operations? - Code of conduct: minimising environmental harm, reducing waste, producing
value-for-money quality products, improved customer service.
o Environmental sustainability and social responsibility
o A socially responsible business tries to achieve two goals: expanding the business, providing for
the greater good of society. Customers will reward socially responsible businesses with repeat
business.
OPERATIONS PROCESSES
• Inputs
• Transformed resources (materials, information, customers)
• Transforming resources (human resources, facilities)
• Transformation processes
• The influence of volume, variety, variation in demand and visibility
• Sequencing and scheduling – Gantt charts, critical path analysis
• Technology, task design and workplace layout
• Monitoring, control and improvement
• Outputs
• Customer services
• Warranties
INPUTS
o Common direct inputs: energy, labour, machinery, technology, raw materials.
o Transformed inputs:
o Materials: tangible elements used in the production process
o Raw: metal, wood, water, eggs
o Intermediate: flour, sugar, bolts
o Information: the knowledge gained from research, investigation and instruction, which results in
an increase in understanding.
o External: ABS, reports, academic journals, market reports, statistics
o Internal: Financial reports, production data, inventory turnover rates, KPI’s
o Customers: become transformed resources when their choices shape inputs
o CRM (Customer Relationship Management): the systems that businesses use to maintain
customer contact. Can improve customer service, increase competitiveness, and identify
changes in consumer taste and behaviour.
o Improves services, reduces production costs, allows for more direct responsiveness to
customer needs.
o Transforming inputs:
o Human Resources:
o Used for designing product, sourcing materials, setting up and programming machinery,
coordinating process, organise transportation and record workplace incidents.
o Facilities:
o Businesses must consider location for facilities, with features like customer accessibility,
parking resources, zoning laws, size and nearby competition. They must also consider the
finances involved, and whether to purchase or build a new facility.
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TRANSFORMATION PROCESSES
o Transformation is the process of adding value to a good or service.
o 4V’s
Volume: refers to how much of a product is Low: tailors
made. High: car manufacturers
Variety: refers to the range of products made Low: milk

High: McDonald’s
Variation (in demand): the amount of a Low: petrol

product desired by consumers (seasonal) High: ice cream
Visibility: also referred to as the nature of Low: supermarkets

customer contact or ‘feedback’ High: restaurants
o Lead time = the time it takes for an order to be fulfilled from the moment it is made.
o Scheduling & Sequencing
o Sequencing is a planning activity which decides the order operations processes will occur.
o Scheduling is another planning activity that indicates what work is to be done and when.
o Gantt Charts
o Indicates: work which needs to be completed, what order they will be achieved, how long
each activity is expected to take.
o Critical Path Analysis (CPA)

o The critical path is the shortest length of time it takes to complete all tasks.
o Some tasks can be performed simultaneously – because each activity on the schedule must
be completed to make the final product.
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o Technology
o Businesses should acquire up-to-date technology in order to compete effectively.
o Technology can make the operations process more cost effective by speeding up the process,
improve efficiency and increasing capacity.
o Office technology: Telecommute (work from home), ‘paperless trade’, online bookings, customer
feedback, sales promotions, tracking orders, websites…etc
o Manufacturing technology:
o Robotics: highly specialised, high quality, efficient, but high-cost.
o CAD (Computer-aided design): generates 3D diagrams from given inputs.
o CAM (Computer-aided manufacturing): computer-controlled manufacturing process
o Task Design
o The way the overall transformation process is broken down into manageable activities, and
classifying job activities in ways to aid employees to successfully complete the task.
o The main purpose of a task design is to improve business productivity.
o It is an example of interdependence between HR and Operations.
o Skills audit: used to determine the present level of skilling and any shortfalls that need to be made
up through training or recruitment.
o Workplace Layout
o Plant layout: the arrangement of equipment, machinery and staff within a facility.
o Process/functional layout: the arrangement of machines according to the function they perform.
o Eg. hospitals – maternity wards, intensive care units.
o Product layout: where the equipment
arrangement relates to the sequence of tasks
performed in manufacturing a product.
o Eg. the assembly of cars or televisions
o Fixed position layout: an operational arrangement in which employees and equipment come to the
product.
o Eg. constructions of bridges, ships and buildings.
o Office layout: typically organised around discrete workstations, designed for smooth workflow.
o The operations manager needs to ensure the best plant layout in order to:
o Have enough physical space for production
o Effective use of equipment and technology
o Conforming with legal regulations (eg. WH&S)
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o Monitoring, control and improvement
o Monitoring is the process of measuring actual performance against planned performance.
§ Measures KPI’s: lead times, turnover rates, maintenance costs, direct cost analysis.
o Control occurs when KPI’s are assessed against predetermined targets and corrective action is
taken if required.
§ Improvements in processes are often framed around quality (quality control)
o Improvement refers to systematic reduction of inefficiencies and wastage, poor work processes
and elimination of any bottlenecks.
§ A bottleneck is an aspect of the transformation process that slows down the overall process
OUTPUTS
o Customer Service
o Refers to how well a business meets and exceeds the expectations of customers in all aspects
o Advantage of good customer service is attracting and maintaining long-term customers.
o Warranties
o Guarantees from businesses to get full refunds or replacements within a certain timeframe, if a
good has defects or a service is not satisfactory.
o These responsibilities make up the implied warranty that give consumers legal protection under
the Fair Trading Act 1987 and the Competition and Consumer Act 2010.
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OPERATIONS STRATEGIES
• Performance objectives – quality, speed, dependability, flexibility, customisation, cost
• New product or service design and development
• Supply chain management – logistics, e-commerce, global sourcing
• Outsourcing – advantages and disadvantages
• Technology – leading edge, established
• Inventory management – advs and disadvs of holding stock, LIFO, FIFO, JIT
• Quality management
• Control
• Assurance
• Improvement
• Overcoming resistance to change – financial costs, purchasing new equipment,
redundancy payments, retraining, reorganising plant layout, inertia
• Global factors – global sourcing, economies of scale, scanning and learning, research and
development
PERFORMANCE OBJECTIVES
o Quality
o The main aim with providing a quality product is customer satisfaction and hence, repeat business.
o Higher quality = less mistakes = decrease manufacturing costs = higher customer satisfaction.
o Speed
o Relates to the ‘lead time’; businesses can occasionally charge more for a faster delivery service.
Eg. Dominos, ebay. It reduces inventory and storage costs.
o The main aim is to increase the income and cash flow, as well as customer satisfaction.
o Dependability
o Relates to being on time and carrying out an action. It’s a priority for customers and determines
repeat business.
o Flexibility
o Relates to a business being able to change, modify or adapt to changing circumstances, eg.
economic conditions, weather, competition.
o Customisation
o Is the creation of individualised products to meet the specific needs of the customers. Eg. tailors
o It is increasingly possible due to advances in operations technology; eg. Adidas, Apple Mac.
o Disadvantages: slows down production, increases lead time, need specialised training
o Cost
o Profit = Sales – Expenses. Objective is to maximise profit and minimise expenses.
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NEW PRODUCT OR SERVICE DESIGN
o When? When existing products start to approach the maturity/post maturity stage, or when sales and
profits start to become stagnant or decrease.
o Process: Concept development, cost benefit analysis, production design, product testing.
o Important factors: quality, supply chain management, capacity management, and cost.
o Service design and development differs from that of products as services are intangible and ‘consumed’.
SUPPLY CHAIN MANAGEMENT

o Involves the management and flow of supplies throughout all input, transformation process and outputs.
o 3 goals: to reduce inventory, to increase the speed of transactions, to increase revenue by satisfying
customer demand more efficiently.
o Sourcing
o Refers to the purchasing of inputs for the transformation processes.
o Influences: consumer demand, quality of inputs, flexibility and timeliness of supplies, costs
o Trends in sourcing: supplier rationalisation, backwards vertical integration, cost minimisation,
flexible/responsive supply chain process.
o Global sourcing
o Refers to the use of global markets for the purchasing of any supplies.
o Advantages: satisfies performance objectives, cost and expertise overseas, access to new
technologies and resources.
o Disadvantages: Possible relocation of aspects of operations, increase cost of logistics, storage and
distribution, increased complexity, managing different regulations.
o E-commerce
o Refers to both the buying and selling of goods and services via the internet.
o E-procurement is the use of online systems to procure or obtain supply.
Advantages Disadvantages
Access to wider markets Less operational visibility
Large opportunity for sources Less personal selling, physical disconnect
Less inventory management costs Risky supply chain management
More customisation opportunities Prices are more competitive
24/7 service/interaction More global competition
Greater availability & information Online security issues
o Logistics
o Involves transportation, the use of storage/warehousing centres and materials handling/packaging.
o Distribution: The ways of getting the goods or services to the consumer.
o Transportation: concerned with the physical movement of inventories. Need to be carefully
selected, as determined by speed, distance, cost and capacity of mode of transportation.
o Warehousing: is the use of a facility for the storage, protection and distribution of stock.
o Packaging: Some products require particular skills, care or attention when being moved.
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OUTSOURCING
o Business Process Outsourcing (BPO) uses external providers to perform a business function:
o Operations – manufacturing, design, sourcing, logistics
o HR – training and development, data management
o Finance – accounting, financial reports, taxes
o Marketing – strategy, PR, advertising
o Legal process outsourcing (LPO) – patents, trademarks
o Forms: captive/in house or non-captive (outsourced to 3rd parties through the market)
o Managers must consider which vendor, geo location, contract length, management, KPI’s etc
o Co-sourcing: 2 parties manage success of particular aspect. The work done by an external expert who
works within the business as a contractor. Business has better control over work given to specialist.
-‐ Simplification for business -‐ Payback costs - initial outsourcing costs may
-‐ Can focus on core bus functions be high, bus may not experience cost savings
-‐ Efficiency and cost savings until 2-3 yrs later
-‐ Access to resources the business lacks -‐ Loss of control
-‐ ↑ process capability - access to improved tech -‐ Communication and language issues
can help increase the output produced -‐ Loss of info security – privacy less secure
-‐ Strategic benefits – get around trade barriers, -‐ Hierarchies – complex outsourcing
different time zones (24 hr production), strong agreements can create unwanted hierarchies
partnerships à provider suggests innovative leading to inefficiencies
solutions to the business etc
TECHNOLOGY
o Tech can improve inputs, transformation processes or outputs.
o Assist in managerial and administrative functions
o Create products quicker and to more controlled quality standards, less waste
o Accommodates facilities to design revolutionising products
o Leading edge: most advanced or innovative technology (eg. nanotechnology, 3D printing)
o Established: widely used and accepted technology (eg. barcodes, spreadsheets)
INVENTORY MANAGEMENT
o Inventory or stock: amount of raw materials, partially processed and finished goods a business holds
Advantages of holding stock Disadvantages of holding stock

Can meet demand, maintain customers Costs eg. storage, wastage, insurance
Alternatives can be offered Cost of obsolescence if stock remains unsold
Decreased lead times between order and delivery Invested capital, labour, energy wasted.
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o If a business holds stock, it must decide on the ORDER it is used and VALUE of it.
o LIFO (Last In First Out)
o Consumers get ‘fresher’ goods, however old goods can become obsolete, wasted.
o More expensive as prices generally increase overtime.
o Old stock bought at lower prices so real value of remaining stock is LOWER than claimed
o LIFO = COGS ↑ = GP ↓ = NP ↓ = lower taxes
o FIFO (First In First Out)
o Less likely goods will become outdated, but ‘older’ goods may create bad impression.
o Value of remaining stock is HIGHER than claimed.
o LIFO = COGS ↓ = GP ↑ = NP ↑ = higher taxes
o JIT (Just In Time)
o Holding minimal stock, stock only ordered when needed. Minimises wastage!
o Only make enough products to meet demand. Can be used with LIFO or FIFO.
o ‘lean production’ method can help overcome end-of-period stock valuation
o Requires flexible operations that can respond quickly to changes in demand and reliable suppliers
to have deliveries received at the right time
QUALITY MANAGEMENT
o Def: processes undertaken to ensure consistency, reliability, safety and fitness of purpose of a product.
o QC reactive, QA and QI proactive
o Quality Control
o Inspections at various points in production to check for problems or defects.
o Assesses quality of products and processes against quality standards set through tests
o Failure to meet pre-determined quality standards leads to corrective action
o Services – inspections of employee performance eg. accuracy, courtesy, efficiency.
o Quality Assurance
o Using a system to ensure set standards are achieved in production.
o Having products right the first time to avoid wastage, time, energy, labour costs.
o Ensuring product is ‘fit for purpose’
o Quality Improvement
o Continuous improvement: ongoing commitment to improve products, belief that overtime will
be more effective and efficient.
o Staff encouraged to take initiative and suggest improvement areas
o TQM – holistic approach. Responsibility for absolute quality.
o 1. Benchmarking. 2. Employee empowerment. 3. Focus on the customer. 4. Continuous
improvement.
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OVERCOMING RESISTANCE TO CHANGE
o External (eg. legislation, economy) and Internal (eg. application of tech)
o Resistance to change has two main forms – financial and psychological/emotional
o Financial Costs
o Purchasing new equipment – outlay high but money regained through use.
o Redundancy payments – high costs when many employees are made redundant.
o Retraining – reorganising job roles may require skill training and development.
o Reorganising plant layout – costs in transporting, powering, downtime, loss of productivity
o Inertia
o Psychological resistance to change. Uncertainty of the unknown.
o Employees may fear they will lose their jobs, find new tech intimidating etc.
o Strategies to overcome resistance to change:
o Be adaptable and anticipate constant changing circumstances
o Be proactive and allow changes to integrate into the business.
o Establish a workplace culture that supports employee development and participation
o Change management strategies
o Identify source of change and assess whether processes need to be adjusted
o Lower resistance by communicating with employees about need for change, provide support
o May need to use a change agent, or apply change models such as Kurtz Lewin’s model.
GLOBAL FACTORS
o Global sourcing: businesses purchase supplies or services without being constrained by location
Access to cheaper suppliers/ resources Increased cost of logistics
Access to new technology Possible relocation of operations
Expertise and labour specialisation Increased complexity of operations –
Ability to operate over extended hours financial (exchange rate fluctuations) or
contractual (language, regulatory difs etc)
o Economies of scale: higher demand in product requires larger scale production.

o Decreasing average cost per unit sold. As well as allowing cheaper sourcing, bulk purchasing
o Scanning and learning: observing global environment, learning from best practices around the world.
o Diversity of experience helps a business learn how to handle issues with flexibility and insight
o Research and development: create leading edge technology & innovate products/solutions
o Governments encourage R&D through tax incentives and grants that assist business to invest in
resources.
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MALIA CRAWFORD
MARKETING
ROLE OF MARKETING
• Strategic role of marketing goods and services
• Production/Selling/Marketing approaches
• Types of markets – resource, industrial, intermediate, consumer,
mass, niche.
STRATEGIC ROLE OF MARKETING GOODS AND SERVICES

o Strategic = long-term (5 years) goals.
o Marketing is the total process, by which an organisation plans, produces, prices, promotes and distributes
a product to the consumer.
o The most common strategic marketing goals for a firm are:
o Achieve a competitive advantage. o Improve brand awareness.
o Increase market share. o Maximise profits.
o Role of marketing in society:
o To provide the goods and services society needs.
o To be responsible for the jobs that are created when these goods and services are produced.
o To be socially responsible, as expected by society.
INTERDEPENDENCE WITH OTHER KEY BUSINESS FACTORS

o Operations
o Operations translates into the basis for marketing campaigns.
o Marketing must strategize to reflect the general advantages of the product.
o Finances
o Failed marketing efforts leads to loss of money and campaigns can be expensive.
o Budgets and forecasts must be established for promotional campaigns.
o HR
o Must work together to ensure effective staffing.
o HR are responsible for providing training or development to staff to complete their responsibilities.
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PRODUCTION/SELLING/MARKETING APPROACHES
TYPES OF MARKETS
Type Definition Example

Resource Engaged in all forms of primary Forestry, fishing, mining,
production. agriculture
Industrial Purchases products to use to create LG buys metal to make TV’s

other products
Intermediate Products are sold to companies that David Jones sells Hugo Boss
sells to other customers.
Consumer Sells to individuals for personal use
Mass Market that appeals to vast majority of Gas, electricity, tap water
customers
Niche Specialised goods and services. Specialised magazines
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INFLUENCES ON MARKETING
• Factors influencing customer choice – psychological, sociocultural, economic, government.
• Consumer laws
o Deceptive and misleading advertising
o Price discrimination
o Implied conditions
o Warranties
• Ethical – truth, accuracy and good taste in advertising, products that may damage health,
engaging in fair competition, sugging.
FACTORS INFLUENCING CUSTOMER CHOICE
CONSUMER LAWS
o Deceptive and misleading advertising
o It is illegal to describe a product as better than it really is and thus mislead consumers.
o Prohibited under the Australian Consumer Law (2011).
o Price discrimination
o Refers to the charging of different prices for the same product in different markets. It can occur
between the supplier and consumer as well as the supplier and the retailer.
o Competition and Consumer Act (2010).
o Eg. Coles and Woolworths using their retail strength to pressure petrol companies for reduced
petrol prices.
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o Implied conditions
o The conditions of a product that are not stated but are implied or conveyed at the point of sale of
a product.
o Three basic rights:
o Of merchantable quality and reasonable standard
o Fit for purpose – product does what business claims it can do.
o As described – eg. a ring advertised as gold must be gold.
o Warranties
o All consumer goods and services have certain implied warranties, set by Australian Consumer
Law and cannot be refused, changed or limited by a retailer or supplier.
o Eg. purchaser has undisputed ownership of the good, purchased service must be carried
out with due care and skill and product must do what it is supposed to do.
o If a product is faulty upon leaving the story, the product can be returned for a refund or exchanged.
ETHICAL ISSUES
o Business Ethics: Moral guidelines for the conduct of business affairs, often set in Ethical Codes of
Practice.
o Truth, accuracy and good taste in advertising.
o Competition and Consumer Act (2010) and Advertising Federation of Australia (AFA) regulate
this in regards to a business’s promotional materials.
o Good taste may refer to a business’s methods for publicity, as in some organisations might
implement controversial strategies that would spark debate and thus free publicity, which isn’t in
good taste, as promotion costs thousands of dollars.
o Products that may damage health.
o The federal and state governments try to restrict the provision of various goods and services that
may act as a health detriment to the consumer (‘sin’ goods), without applying a ban on their sale.
Eg. cigarettes, alcohol, casino entries.
o Engaging in fair competition.
o Australian Competition and Consumer Commission regulates.
o Unfair competitive-behaviour includes:
o Price-fixing between major competitors in market with the aim of reducing competition.
o Long-term loss leader - undercutting smaller competitors in the short term, forcing
smaller businesses to engage in a price war.
o Sugging.
o Selling under the guise of research.
o Consumers are asked general questions, which is used to determine the needs of the consumer and
suggest products that will cater to those needs.
o If consumers aren’t aware that the business is attempting to promote and sell its products, this
strategy is unethical.
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MARKETING PROCESS
• Situational Analysis – SWOT, product life cycle
• Market research
• Establishing market objectives
• Identifying target markets
• Developing marketing strategies
• Implementations, monitoring and controlling – developing a financial forecast; co actual and
planned results, revising the marketing strategy
SITUATIONAL ANALYSIS
o SWOT
o Identifying strengths, weaknesses, opportunities and threats in both the internal and external
environments.
o Allows a business to quickly evaluate its strategic position and think critically about its future.
o Product Life Cycle
o Analyses the life of a product and what stage in the market
cycles it resides in.
o Will allows businesses to evaluate what the product needs
in the current stage.
o Five stages: Research & Development, Introduction,
Growth, Maturity and Decline.
MARKET RESEARCH
o Market Research is the process of systematically collecting, recording and analysing information
concerning a specific marketing problem.
o Main purpose: to minimise the risk of market failure, when releasing new products.
o Three-step approach:
o 1: Determine information needed. What needs to be measured? What are the issues?
o 2: Collect data from primary and secondary sources.
o Primary: Interviews and surveys.
o Secondary: Industry reports and ABS.
o 3: Data analysis and interpretation. What does this data mean?
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ESTABLISHING MARKET OBJECTIVES
o Marketing Objectives are the realistic and measurable goals to be achieved through the marketing plan.
o They should be more customer oriented than the goals for the entire business.
o Increase market share: refers to the business’s total share of the total industry sales for a market.
o Expand the product range: product mix is the total range of products offered by a business.
o Maximising customer service: responding to the needs and problems of the customer.
IDENTIFYING TARGET MARKETS

o Target markets are groups of present and potential customers to which a business intends to sell its
product. The customers share similar characteristics, such as age, income, or lifestyle.
o Identifying a target market allows the business to better satisfy the wants and needs of the
targeted group.
DEVELOPING MARKETING STRATEGIES

o PRODUCT:
o Packaging, Style, Quality, Branding, Warranty
o PRICE:
o Competition-based, Price points, Market price, Cost-price, Discounts, Loss leader
o PLACE:
o Distribution channels, Storage & Warehousing, Transportation
o PROMOTION:
o Personal selling, Word of mouth, Public relations and publicity, Below-the-line, Advertising
IMPLEMENTATIONS, MONITORING AND CONTROLLING

o Implementation is the process of putting the marketing strategies into operation. It is important as it
involves the ‘how’ ‘where’ and ‘when’, but it can be difficult as unforeseen situations may arise that
jeopardise the success of the plan.
o Monitoring means checking and observing the actual progress of the marketing plan. What is happening?
o Controlling is comparing the actual performance with planned performance and taking corrective action
if necessary. Do we need to change anything?
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MARKETING STRATEGIES
• Market segmentation, product and service differentiation, positioning
• Product – branding, packaging, goods and services
• Price - Cost-based, competition-based, market-based
o Pricing strategies – price points, price penetration, loss leader, price skimming
o Cost and quality interaction
• Place - Distribution channels
o Channel choice – intensive, selective, exclusive
o Physical distribution issues – warehousing, transport, inventory.
• Promotion - Elements of the marketing mix – advertising, personal selling and relationship
marketing, sales promotions, publicity and public relations.
o The communication process – word of mouth, opinion leaders.
MARKET SEGMENTATION, PRODUCT AND SERVICE DIFFERENTIATION, POSITIONING

o Market Segmentation is the process of splitting the market into groups based on:
o Demographic, geographic, psychographic or behavioural factors.
o Advantages: Better understanding of customers, increase sales, growth opportunities and new
product opportunities.
o Product and Service Differentiation is when similar products are made to appear different from and/or
better than those of their competitors. Four important points of differentiation are:
o Customer service, environmental concerns, convenience and social and ethical issues.
o Positioning is the business’s understanding of how their products/services are perceived by the general
public. The most common ranking attributes are price and quality.
o This is so to develop strategies based on their positioning and identify gaps in the market and the
need to reposition.
PRODUCT
o Goods and/or Services
o A product is a good or service that can be offered in an exchange. There are three types:
o Core product: The basic good that consumers look to buy. Eg. mp3 player.
o Actual product: ^ + additional physical aspects customers pay for. Eg. packaging.
o Augmented product: Additional aspects that add value. Eg. warranties.
o Branding
o A brand is a distinguishing name, term, symbol, and/or design to identify a specific product and
distinguish it from competition. Marketers aim for recognisable branding.
o A brand symbol is a graphic representation that identifies a business or product.
o Manufacturer’s brand: Sunbeam appliances, Kraft foods, Billabong clothing.
o Private brand: Myer brands like Reserve, Basque, Blaq.
o Generic brand: Franklins, Coles, Woolworths.
o Packaging
o Packaging refers to the way in which a product is presented. It is an important marketing strategy
because it can serve as a form of advertising at the point of sale. It also:
o Protects the product during transportation, on the shelves, during use.
o Informs the consumer about the use of the product.
o Promotes the product and distinguishes it from its competitors.
PRICE
o Price refers to the amount of money a business is requesting the customer exchanges for a product. Prices
can contain perceptions about value, and differing prices create competition between businesses.
o Methods:
o Cost-based: Prioritise covering costs. Might add a mark up to make a profit.
o Competition-based: Can keep same, can lower or raise higher to change consumer perception of
products.
o Market-based: What are the consumers willing to pay? Eg. hotels, concerts, flights.
o Strategies:
o Penetration pricing: Lower price to gain market share. Eg. Target, Walmart.
o Price skimming: Unique product for high price. Eg. Mercedes, iPhones.
o Loss leader: Pricing lower than it costs, relying on consumers purchasing multiple items.
o Price points: Mix of high quality and low quality products, to indicate level of prestige. Eg. airlines
(first class, business class, economy).
o Price and quality interaction:
o Prices often reflect the quality of the product.
o Low quality = low price. High quality = high price.
o Businesses try to break this perception to get the best of both worlds. Eg. Aldi advertising high
quality for low price.
o Celebrity endorsements can sell low quality for high prices – optimal for saving costs.
PLACE
o Distribution Channels
o A distribution channel connects a manufacturer to retailer to consumer.
o Direct Channel: the producer distributes directly to the consumer.
o Indirect Channel: the producer uses intermediaries to serve the market. Eg. brokers,
retailers.
o Channel Choice
o Market coverage refers to the number of outlets a firm chooses for its products.
o Intensive: The business makes the product available in every possible outlet. Eg. milk,
lollies, newspapers, Coca Cola.
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o Selective: Only moderate proportion of all possible outlets, where customer is prepared to
seek out specific outlet that stocks. Eg. clothing, furniture, electrical appliances.
o Exclusive: Only one retail outlet in a large geographical area. Eg. Cars, Louis Vuitton.
o Physical Distribution Issues
o These are all those activities concerned with efficient movement of the products to the consumers.
o Transport: type of product, speed of delivery, cost and distance to be covered.
o Warehousing: convenient location, storage space, cost.
o Inventory: Economic quantity of stock, management of stock levels.
PROMOTION
o Promotion describes the methods used by a business to inform, persuade and remind a target market
about its products.
o Objectives: Increase brand awareness, attract new customers, encourage existing customers and
provide information to customers.
o Elements of the Promotion mix
Advertising A paid, non-personal message communicated through a mass medium.
e.g. TV, radio, cinema, billboards, magazines, internet, telephone… etc
Personal The activities of a sales representative directed to a customer in an attempt to make a
Selling sale. Advantages: Modified to suit customer, creates long-term relationships.
Relationship The development of long-term cost-effective relationships with individual
Marketing consumers. e.g. loyalty programs like FlyBuys, Frequent Flyers, Everyday Rewards.
Sales The use of activities or materials as direct incentives to customers. e.g. price
Promotions reductions, coupons, free samples, gifts/premiums, point-of-purchase displays…etc
Publicity Free news story about a business’s products. Aims to enhance business image.
Public Those activities aimed at creating and maintaining favourable relations between a
Relations business and its customers. Four main ways: Promoting positive image, effective
communication of messages, issues monitoring and crisis management.
o The Communication Process

o Communication about a business and its products must be clear, efficient and succinct.
Miscommunication may result in lost sales.
o A channel is any method used for carrying a message. Eg. Print or electronic media.
o Businesses must avoid distractions (noise) in the communication process. Eg. faulty printing,
inappropriate language or images, jargon, competing messages.
o Opinion Leader: A person who influences others. Their opinions are respected and sought
out for advice. They are used as information outlets for endorsing new/existing products.
o Word of mouth: Consumers trust friends’ opinions, so this can be powerful. Social media
and industry apps are used as a channel for word of mouth promotion. Eg. Yelp.
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MALIA CRAWFORD
FINANCE
ROLE OF FINANCIAL MANAGEMENT
• Strategic role of financial management
• Objectives of financial management
o Profitability, growth, efficiency, liquidity, solvency
o Short-term, and long-term
STRATEGIC ROLE OF FINANCIAL MANAGEMENT

o Financial management involves a business planning and monitoring their financial resources so that
their financial objectives are achieved. In charge of setting financials objectives to help business achieve
it’s long-term strategic goals.
o Strategic role is to make funds available to ensure that day to day operations run smoothly.
OBJECTIVES OF FINANCIAL MANAGEMENT
Objectives Definition
Profitability Ability of a business to maximise its profits by= increasing revenue and
reducing costs. Eg. monitor pricing policies.
Growth Ability of a business to increase size in the long term by developing their asset
structure to increase sales, profit and market share.
Efficiency Ability of a business to maximise profit with the lowest possible level of
assets (minimise inputs, maximise outputs) by monitoring inventory, cash and
receivables.
Liquidity The extent to which a business can meet short term financial commitments
by having a sufficient cash flow or be able to convert current assets into cash
quickly.
Solvency The extent to which a business can meet long term financial commitments,
show if business can repay borrowed investments.
o Short term: operational (day-to-day) and tactical (1-2yr) objectives. Eg. enter new market.
o Long term: strategic (3-5+ years) Eg. increase market share.
INTERDEPENDENCE WITH OTHER KBF

o Financial management must allocate adequate funds to each department to operate successfully, as well
as develop budgets and cost controls for each department.
o For example, if marketing is allocated a huge part of the budget, operations may not have adequate funding
to create the products, and therefore money is wasted on marketing efforts, as they do not have the supply.
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INFLUENCES ON FINANCIAL MANAGEMENT
• Internal sources of finance – retained profits
• External sources of finance
o Debt – short-term borrowing (overdraft, commercial bills, factoring), long-
term borrowing (mortgage, debentures, unsecured notes, leasing)
o Equity – ordinary shares (new issues, rights issues, placements, share
purchase plans), private equity
• Financial institutions – banks, investment banks, finance companies, superannuation
funds, life insurance companies, unit trusts and the Australian Securities Exchange
• Influence of government – Australian Securities and Investment Commission,
company taxation
• Global market influences – economic outlook, availability of funds, interest rates
INTERNAL SOURCES OF FINANCE

o Retained profits: Net profits kept as a cheap accessible source of finance for future activities, limited
source of funds.
o Owner’s equity: Funds contributed by business owner to establish and build business.
EXTERNAL SOURCES OF FINANCE

o Short-term debt
Bank Agreement that a business can overdraw its account to an agreed limit, small
overdraft amount.
Advs: helps overcome temporary cash shortfalls, minimal costs, lower interest
Disadvs: interest paid on daily outstanding balance of account
Commercial Loan issued by mainly non-bank financial institutions, large amounts
bills ($100k+).
Advs: receive money immediately, flexible interest, repayment period
Disadvs: interest, secured with assets
Factoring Selling accounts receivable at discounted price to finance/factoring company.
Advs: immediate lump sum can improve cash flow + solvency
Disadvs: full amount not received, loss of current assets
o Long-term debt
Mortgages Loan is secured by the property of the borrower. Used for property purchases.
Regular repayments with interest over agreed period of time.
Advs: access broad funds, splits debts over long-term
Disadvs: high interest rates, continual payment for long period of time
Debentures Business borrows money for a fixed interest rate and fixed period of time.
Investor lends money and business issues a debenture promising payments.
Advs: amount of profit made has no effect on interest rate since it’s fixed
Disadvs: secured with assets.
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Unsecured Loan from investors for a set period of time
notes Advs: not secured with assets
Disadvs: high risk so high interest rate.
Leasing Pay to use equipment owned by another party
Advs: business avoids large capital outlay, lease payments tax deductible
Disadvs: not full ownership of resources, regular payments.
o Equity
o Ordinary shares: Purchasers become part-owners of a public company –voting rights/dividends
New issues Security issued and sold for the first time on a public market (ASX)
‘primary shares’ and ‘initial public offering (IPO)’
Rights issues Shareholders can buy new shares in the same company usually in
proportion to the number of shares they already own
Placements Allotment of shares at a discount made directly from business to

investors
Share purchase plans Offer existing shareholders more shares without brokerage fees.
o Private equity: Money invested in a private company.
FINANCIAL INSTITUTIONS
o Financial institutions collect funds and invest them in financial assets. They provide financial services
and deal with financial transactions such as investments, loans and deposits.
Banks Receive deposits from individuals, businesses, government and
make investments and loans to borrowers.
Largest financial institution however their share has decreased with
financial market deregulation.
Investment banks Services in borrowing and lending primarily to the business sector
eg. Macquarie Bank. Have different types to customise to suit.
Can arrange long-term finance, advise on mergers, acquisitions,
portfolio investment management services.
Finance companies Non-bank. Specialise in smaller commercial finance.
Short and medium term loans – hire-purchase, personal loans, lease
Quick access to funds but higher interest and secured assets.
Superannuation Employers fake financial contributions 9.5% for employees paid
funds >$450 before tax in calendar month.
Funds received are invested in corporate sector, can be invested in
long-term securities as company shares
Life insurance Non-bank, pay regular premiums – insurer guarantees cover and
companies lump sum payment to designated beneficiary when insuree dies.
Funds received through premiums, called reserves, are invested in
financial assets
Unit trusts Take funds from a no. of small investors and invest them in
financial assets. Short-term money market, shares, mortgages,
property and public securities.
Australian Securities Primary stock exchange group in Australia, shares are bought and
Exchange sold. Eg. BHP Billion.
Primary market: deals with the new issue of debt instruments
Secondary market: deals with purchase + sale of existing securities
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INFLUENCE OF GOVERNMENT
o Australian Securities and Investment Commission (ASIC)
o ASIC is an independent statuary commission accountable to Commonwealth parliament
o Protects consumers in areas of investment, insurance, super and banking
o Aims to reduce fraud and unfair practices in financial markets & products
o Ensures companies adhere to laws and makes financial information publicly accessible
o Company taxation
o All private and public companies must pay company tax
o 30% of net profits before distributing dividends
o Reduced over last decade to increase international competitiveness and attract foreign investment
o Businesses need to manage finance to have adequate funds available for when taxes are due.
GLOBAL MARKET INFLUENCES

o Economic Outlook:
o Projected changes in the level of economic growth throughout the world
o Positive economic outlook will result in:
§ ↑ demand - ↑ production ↑ funds for equipment, expansion, employ staff
§ ↓ interest rates on funds borrowed internationally due to ↓ risk with repayments
o Availability of funds
o Ease of borrowing funds from international financial markets
o Impacts whether business can access money needed to expand
o Rates/conditions depend mainly on: risk, supply and demand, domestic economic conditions
o Global Financial Crisis 2009 impacted AOF ↑ interest rates due to high risk levels with lending.
o Interest Rates
o Cost of borrowing money
o Higher risk, term of loan is short = higher interest rate
o Australian interest rates are often higher than other countries so businesses may borrow money
from overseas, however currency fluctuations could affect this.
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PROCESSES ON FINANCIAL MANAGEMENT
• Planning and implementing –needs, budgets, record systems, risks, financial controls
o Debt and equity financing – advantages and disadvantages of each
o Matching the terms and source of finance to business purpose
• Monitoring and controlling – cash flow statement, income statement, balance sheet
• Financial ratios:
o Liquidity – current ratio
o Gearing – debt to equity ratio
o Profitability – gross profit ratio; net profit ratio; return on equity ratio
o Efficiency – expense ratio; accounts receivable turnover ratio
o Comparative ratio analysis – over different time periods, against standards
• Limitations of financial reports – normalised earnings, capitalising expenses, valuing
assets, timing issues, debt repayments, notes to the financial statements
• Ethical issues related to financial reports
PLANNING & IMPLEMENTING

o Financial needs
o Determined by factors: business size, phase of business cycle, future plans for growth, capacity to
source finance, management skills for assessing financial needs and planning.
o Financial info (budgets, 3 statements, ratio analysis report) much be collected
o Budgets
o Provides quantitative info about requirements to achieve particular purpose
o Helps to monitor objectives, and control expenses. Measures planned against actual performance
o 3 types: operating (main activities), project (capital expenditure, R&D), and financial.
o Record Systems
o Allows businesses to record all the financial information they need eg accounting software.
o Mechanisms employed to ensure data recorded is accurate, reliable, and accessible.
o Financial risk
o Risk that a business will be unable to cover its financial obligations -> bankruptcy.
o Business must consider whether profit generates will cover cost and justify the risk of debt.
o Financial controls
o Policies and procedures that ensure business plans will be achieved in the most efficient way
o Common problems: theft, fraud, damage, errors in records.
o Control procedures: clear authorisation, protection of assets, control credit procedures etc.
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DEBT Advantages DEBT Disadvantages
Funds are readily available, can be obtained Expensive eg. interest
on short notice Increase risk eg. assets secured lost
Many types available to suit business needs Regular repayments made regardless of cash
Interest payments are tax deductible flow
Don’t lose ownership
EQUITY Advantages EQUITY Disadvantages
Low gearing Long, expensive process to obtain funds
Less risky Ownership diluted
Cheaper as there are no interest payments Lower profits and returns for the owner
MONITORING & CONTROLLING

o Cash Flow Statement:
o Movement of cash receipts and cash payments from transactions
o Identify trends and predict change
o Better predicter of a business’s status rather than profitability
o Shows whether as business:
§ Can manage its cash and generate positive cash flow (fluctuations = difficulties)
§ Can pay its fin commitments as they fall due
§ Can pay drawings to owners or dividends to shareholders
§ Has sufficient funds for future expansion or change
§ Can obtain finance from external sources when needed
o Note drawings is the money taken out of the business by the owners for personal use
o Activities of a bus when preparing a cash flow statement:
§ Operating: inflows and outflows relating to the main activities of the bus e.g. sales
§ Investing: relating to purchase and sale of NCA and invesments e.g. selling a vehicle
§ Financing: relating to equity or debt borrowing e.g. dividends, interest
o CB = O + I = O
o Income Statement:
o Income earned and expenses incurred over a period of trading – financial performance
o Selling (e.g. commission) administrative (e.g. stationary) and financial (e.g. dividends) expenses
o COGS = Opening stock + purchases – closing stock
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o Gross profit = Sales – COGS
o Net (retained) profit = Gross profit – Expenses
o Balance Sheet:
o CA can be turned into cash within 12 months, CL can be repaid within 12months
o Owners’ equity: funds contributed by the owners and represent the net worth of the bus
o Owners’ equity is made up of capital and retained earnings
o Shows financial position of bus as it indicates:
§ If the bus has enough assets to cover debts
§ Whether interest and money borrowed can be paid
§ If assets are being used to maximise profits
§ If the owners are making a good ROI
o Accounting equation Assets = liabilities + OE
o Note good will is the value of favourable attitudes from customers etc
o Note working capital is cash available to meet day to day ongoing expenses WC = CA – CL
FINANCIAL RATIOS
o Use ÷ then put that number in 𝑥:1 (to one decimal place)
o Analysis involves working the financial info into significant and acceptable forms that make it more
meaningful, and highlighting relationships between different aspects of a business
o Types of analysis:
o Vertical: compares figures within one financial year e.g. compare debt to equity
o Horizontal: compares figures from different financial years
o Trend: compares figures for periods of 3-5 years
o Liquidity
CURRENT RATIO = CURRENT ASSETS
CURRENT LIABILITIES
o Working capital ratio

o Generally 2:1 considered acceptable – depends on industry, bus type, efficiency of converting
current assets into cash, relations with creditors etc
o A bus with high cash flow may have a higher ratio e.g. supermarket
o Strategies: sell NCA to increase cash to pay CL, factoring to ↑ CA
o Gearing
DEBT TO EQUITY RATIO = TOTAL LIABILITIES X 100%
OWNER’S EQUITY
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o Gearing ratio or solvency ratio
o Measures bus ability to meet financial obligations in the long term
o Anything up to 1:1 or 100% is considered acceptable – above risk of insolvency
o If it’s too low the bus may be missing out on investment opportunities
o Indicates whether creditors will be paid or whether investors can expect a good return
o Highly geared = greater risk = greater potential for profit e.g. manufacturing industry mining
o Sell NCA to pay debt, sell more shares or invite new owners to ↑ equity
o Profitability
GROSS PROFIT RATIO/MARGIN = GROSS PROFIT X 100%
SALES
o Profitability = business earning performance

o Indicates effectiveness of policies regarding cost of supplies, pricing, discounts, sales etc
NET PROFIT RATIO/MARGIN = NET PROFIT X 100%

SALES
o Low NP (esp when GP is relatively high) suggests excessive expenses, bad fin management
RETURN ON EQUITY RATIO = NET PROFIT X 100%
TOTAL EQUITY
o Indicates how much the owner’s investment in the business is earning and their ROI
o Most investors want at least 10% return to make up for the risk
o Efficiency
EXPENSE RATIO = EXPENSES X 100%
SALES
o How well a business manages its resources to ensure good profits and financial stability
ACCOUNTS RECEIVABLE = ACCOUNTS RECEIVABLE X 100%

TURNOVER RATIO SALES / 365
o Round up to the nearest whole day

o Measures efficiency of bus credit policy and how bus collects debts
o Ideally 30 days for debtors to pay their accounts
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o Comparative Ratio Analysis
o Compare ratios to see if objectives are being achieved
§ Over different time periods (previous years)
§ Against standards (industry)
§ With similar businesses
LIMITATIONS OF FINANCIAL REPORTS

o Provides info on state of business and trends but may not give accurate assessment of financial position
o Normalised Earnings:
o Adjust earnings to take into account changes in economic cycle or remove one off/unusual items
(e.g. selling land) that will affect profitability in order to show true earnings.
o Capitalising Expenses:
o Recording an expense as an asset on the balance sheet instead of an expense on the income
statement, for example classifying r + d as an asset as it ‘adds value’ to the business.
o Understates the expenses and overstates the assets and profits of the business.
o Valuing Assets:
o Different methods used to estimate the value of an asset – hard to know real value esp NCA
o Original cost (cost can be verified but may distort the true worth of asset as it may differ from its
current market value) or depreciated/appreciated cost (using accounting standards, but there are
different methods - can mislead investor by creating a false impression of business worth)
o Some assets are difficult to calculate their value, for example intangible goodwill, as there is no
set formula so business may be tempted to overvalue it.
o Timing Issues:
o Matching principle = expenses should be recorded on an income statement for the accounting
period in which the revenue, to which those expenses relate, is earned
o e.g. real estate agent sells property in June at 2% commission à record expense in June
o Financial statements may not show the true performance of a business at certain times of the year
e.g. snowboarding company less profitable during summer.
o Debt Repayments:
o Reports shows gearing (may alarm stakeholders) but not the business ability to collect its debts
o Reports do not show specific info about debt repayments such as:
§ How long has the business had the debt and when is it due?
§ What provisions does bus have for to cover bad debts? Factoring?
§ Have debt repayments been purposely held over until another accounting period?
o Debt repayments on financial records may be distorted to create a favourable view of business
o Notes to the financial statements:
o Notes provide additional info about how figures were calculated, accounting methods, procedures
etc and how they affect the results of the financial statements
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o Helps stakeholders understand the financial statements so they can have an accurate view of the
business’ financial position à however they may be long, complex etc
ETHICAL ISSUES RELATED TO FINANCIAL REPORTS

o Laws regulate many aspects of financial reports but there are aspects businesses can still manipulate to
make reports look favourable to financial institutions and potential investors
o Audited Accounts:
o An audit is an independent check of the accuracy of financial records and accounting procedures
o Helps guard against misuse of funds, fraud, theft, inefficient use of resources, waste
§ Internal: employees check accuracy of financial records and accounting procedures
§ Management: to review strategic plan and see if changes are needed
§ External: Corporations Act 2001 requires an independent specialised audit accountant to
check financial reports are accurate and comply with Australian auditing standards
o Audits check the business’s control procedures by physically checking assets e.g. cash is counted.
o Record Keeping:
o Source documents must be created for EVERY transaction
o Cash given in person not recorded à won’t show up as revenue à less profits à less tax
o ATO monitors business operators who may be evading tax obligations.
o Reporting Practices:
o Accurate financial reports and info needed for stakeholders and investors e.g. valuing assets
o Private company shareholders are legally entitled to receive financial reports annually
Why is financial management important?

o To make enough funds available to pay debts as they fall due
o To avoid short term cash shortfalls leading to liquidity issues
o To prevent ongoing liquidity issues which can led to long term solvency issues à bankruptcy
Purpose of a financial report?
o To make financial decisions
o To monitor and control the bus fin performance e.g. can pay its CL
o To determine if the business has achieved its financial objectives
o To inform stakeholders, especially shareholders, about financial performance
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FINANCIAL MANAGEMENT STRATEGIES
• Cash flow management
o Cash flow statements
o Distribution of payments, discounts for early payment, factoring
• Working capital management
o Control of current assets – cash, receivables, inventories
o Control of current liabilities – payables, loans, overdrafts
o Strategies – leasing, sale and lease back
• Profitability management
o Cost control – fixed and variable, cost centres, expense minimisation
o Revenue controls – marketing objectives
• Global financial management
o Exchange/interest rates, methods of international payment (payment in
advance, letter of credit, clean payment, bill of exchange), hedging, derivatives
CASH FLOW MANAGEMENT

o Manage to ensure payments are made and received without having a cash flow problem
o Implement strategies to ensure cash is available to make payments as they fall due e.g. tax
o Cash flow statements:
o By keeping a record of cash flow you know how much cash you have
o Helps assess whether inflows can match outflows
o Can identify trends and predict change – can then plan to avoid shortages etc
o Distribution of payments:
o Distribute payments evenly throughout the period e.g. year
o To avoid having large outflows occurring at the same time resulting in cash shortfalls
o A cash flow projection identifies periods of potential shortfalls and surpluses e.g. seasonal bus
o Discounts for early payments:
o Creditors offer a discount for early payments as an incentive
o Business receives less money than what is owed but they received funds quicker which can be
immediately used to improve cash flow
o Factoring:
o Business saves time and money involved in debt collection
o Receive funds owed immediately however the full amount will not be received as the factoring
company will take a small percentage for their service.
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WORKING CAPITAL MANAGEMENT
o Working capital is funds available for short-term financial commitments (WC = CA – CL)
o Low WC = need to ↑ debt or sell NCA. High WC = invest cash in NCA
o Working capital mgmt: determining the best mix of CA and CL to achieve business objectives
o Must balance between using funds to create profits and holding funds to cover payments.
o CURRENT RATIO is used to: show if cash flow is well-managed, indicate amount of risk in liquidity.
o Control of current assets:
o Cash
§ Business must manage its level of cash; ensure debts repaid and investments used.
§ Preparing a cash budget to estimate the size and timing of cash receipts and cash payments
§ Shortages can occur due to unforeseen expenses; cash may need to be borrowed/reserved.
o Receivables
§ Ensure that the timing of receivables allows a business to maintain adequate cash.
§ Procedures for managing Accounts Receivable (AR) include:
• Check the credit rating of prospective customers
• Send customers regular statements, and follow up accounts not paid when due.
• Stipulate a reasonable repayment period (30 days)
• Follow up accounts not paid by the due date
• Have policies for collecting bad debts e.g. factoring, charge for late, discount early
§ However, a tight credit policy may lead to customers choosing competitors.
o Inventories
§ Monitor level of inventories so excess or insufficient levels of stock do not occur
§ Excess may lead to cash shortages, insufficient may lead to lost sales. (Try JIT)
§ Must ensure inventory turnover is sufficient to generate cash to pay for purchases and pay
suppliers on time so they will be willing to give credit in the future
o Control of current liabilities:
o Payables
§ Ensure the timing of payables allows the business to maintain adequate cash
§ Holding back accounts payable until the final due date if there is a period of interest-free
trade credit before requiring payment - can improve liquidity.
§ Take advantage of discounts offered by some creditors for early payments.
o Loans
§ Manage establishment costs, interest rates and ongoing charges in order to minimise costs
§ Bus should investigate the different sources of funding from financial institutions
§ Short term loans are generally expensive so their use should be minimised
§ Should form positive relationships with financial institutions to ensure the most
appropriate short term loan is used.
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o Overdrafts
§ A relatively cheap form of borrowing that can help overcome temporary cash shortages
§ Banks require regular payments, establishment fees, interest to be made on overdrafts
§ Bus should monitor budgets on a daily/weekly basis so that cash supplies can be controlled
o Strategies
o Leasing
§ Hiring an asset from another person or company who owns the asset
§ Frees up cash that can be used elsewhere in the business – WC is improved
§ Regular and fixed payments for the lease can be planned to match the bus’s cash flow
o Sale and lease-back
§ Sell an owned asset to a lessor and lease it back through fixed payments for a no. of yrs.
§ ↑ liquidity because the cash obtained from the sale is then used as working capital
PROFITABILITY MANAGEMENT
o Cost controls:
o Fixed and variable
§ Fixed costs are not dependent on the level of operating activity e.g. insurance
§ Variable costs change proportionately with the level of operating activity e.g. materials
§ Changes in the level of operating activity must be managed with rising costs
§ Comparisons of costs with budgets, standards and previous periods.
o Cost centres
§ Managers must identify the source of costs through cost centres to then reduce them.
§ Many costs can be attributed to a particular department or section of the bus (cost centres)
§ Direct costs: can be allocated to a particular product, activity, department etc.
§ Indirect costs: shared by more than one product, activity, department e.g. electricity
o Expense minimisation
§ Establish guidelines and policies to encourage staff to minimise expenses to improve profit
§ Strategies e.g. outsourcing, downsizing, casualization of workforce.
o Revenue controls:
o When determining an acceptable level of revenue with a view of maximising profits, a business
must have clear ideas and policies, particularly about its marketing objectives
o Marketing Objectives:
§ Sales objectives must be pitched at a level of sales that will cover costs and result in profit.
A cost-volume-profit analysis can determine the level of revenue needed to break even and
can help predict the effect of changes in the level of activity, prices or costs on profit.
§ Changes to the sales mix can affect revenue. A business must maintain a clear focus on the
important customer base which most of the revenue depends on before extending product
ranges or eliminating products that contribute least to total revenue.
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§ Pricing policies over-pricing may deter buyers, under-pricing may result in low profits.
§ Some factors that influence pricing:
• Production costs • Perceived quality
• Competitors prices • Government policies
GLOBAL FINANCIAL MANAGEMENT

o Strategies used to deal with external influences and minimise financial risks.
o Exchange rates:
o In global transactions one currency must be converted to another (foreign exchange market)
o Foreign exchange rate shows how much a unit of one currency is worth in terms of another
o Exchange rates fluctuate due to variations in demand and supply à risky for global business
o The impact of currency fluctuation is twofold:
§ Appreciation – imports cheaper and exports expensive reducing the international
competitiveness of Aust exporting businesses (try to minimise costs so prices can be
reduced in order to regain international competiveness)
§ Depreciation – import expensive and exports cheaper improving the international
competitiveness of Aust exporting businesses (importing more expensive so bus needs to
increase demand so it can sell more)
o Interest Rates:
o Traditionally Australian interest rates tend to be above those of other countries
o Australian businesses may borrow money from financial markets overseas to reduce costs.
o But if the Australian dollar depreciates (currency fluctuates) paying interest on loans will become
more expensive leading to increased costs instead of saving money.
o Methods of international payment:
o Paying using a third party who both parties trust e.g. bank may be required
o Payment in advance:
§ Exporter receives payment before goods are sent
§ High risk for importers so very few importers will agree to this
§ Often used if the other party is a subsidiary or if the buyers credit worthiness is uncertain.
o Letter of credit:
§ Letter of credit is a document that an importer requests from their bank
§ The bank guarantees the exporter that goods will be paid for once conditions have been
met e.g. document proving shipment of goods
§ If the importer cannot make the payment the bank will cover the purchase
§ Popular as it relies on the overseas bank rather than the importer
o Clean payment:
§ Exporter ships the goods to the importer before payment is received
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§ Goods are usually shipped with an invoice requesting payment at a certain time after
delivery
§ This is used when the exporter is confident that the importer will pay by an agreed time.
o Bill of exchange:
§ Drawn up by the exporter and their bank, sent to the importers bank demanding payment
from the importer at a specified time
§ The exporter maintains control over the goods until payment is either made or guaranteed
§ Reduces risk involving the bank however costs extra
§ The two types:
• Document against payment – importer can only collect goods after paying for them.
Importers bank must transfer the funds to the exporter’s bank first.
• Document against acceptance – importer can collect the goods before paying for
them. The importer must sign the acceptance of the goods and the terms of the bill
of exchange to receive the documents needed to obtain the goods - pay for the
goods at a later date – MORE RISK.
o Hedging:
o Locking in prices to minimise fluctuations in rates.
o Hedging: minimising the risk of currency fluctuations which can increase costs etc
o Natural hedging strategies:
§ Establish offshore subsidiaries
§ Arrange for import payments and export receipts to be in the same foreign currency so if
the exchange rate changes losses will be offset by gains
§ Insist imports and exports are traded in $AUD to transfer the risk to the importer
o Derivatives:
o Derivatives are used to reduce the exporting risks associated with currency fluctuations
o Forward exchange contract – a contract to exchange one currency for another currency at an agreed
exchange rate on a future date, usually after 30, 90 or 180 days
o Options contract – gives the buyer the right, not the obligation, to buy or sell foreign currency at
some time in the future (when the exchange rate is favourable)
o Swap contract – an agreement to exchange currency in the spot market then reverse the transaction
in the future. It is used when a bus need to raise finance in a currency issued by a country in which
they are not well known and are forced to pay a higher interest rate than a local business.
o e.g. Australian business needs Japanese yen.
§ Finds a Japanese business that wants Australian dollars.
§ Both parties get loans in their own currencies, at cheaper interest rates in their countries.
§ Swap currencies.
§ Then each pays the other currency’s loans and interest.
16

MALIA CRAWFORD
HUMAN
RESOURCES
ROLE OF HUMAN RESOURCE MANAGEMENT
• Strategic role of human resource management
• Outsourcing
o Human resource functions
o Using contractors – domestic, global
STRATEGIC ROLE OF HUMAN RESOURCE MANAGEMENT

o Human resource management: management of the total relationship between an employer and
employee in order to achieve the business’s strategic goals
o Strategic role of human resources is to effectively manage workplace relationships and create a positive
environment where employees are efficient and productivity is high allowing the business to cope with
change, achieve objectives and gain a sustainable competitive advantage.
INTERDEPENDENCE WITH OTHER KBF
o HR managers will collaborate with Operations on strategic decisions e.g. change product
o Finance needed to train and develop staff, pay staff and reward staff - profitability relies on staff, as
well as staff relies on profitability.
o HR hires the most competent people to create and implement Marketing strategies
OUTSOURCING
o Outsourcing: use a third-party specialist business to complete one or more business function
o Specialists can plan for growth, development and management of staff
o Specialists are also used to review business practices and implement strategies.
-‐ Can allow business to focus on core -‐ Loss of control
business activities -‐ Employee unrest
-‐ Reduce labour costs -‐ Lack of compatibility with external
-‐ Improve quality with specialist skills provider
-‐ ↓ production times ↑ speed to market -‐ Increased complexity
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o Using contractors:
o Contractor: an external provider of services to a business
§ Contractors are often for processing functions (repetitive and easily measured) making
it easy for the business to determine cost savings and productivity gains
§ Risks: cost overruns, loss of quality, difficult to monitor activities
§ Set clear legally binding terms, timeframes and conditions to avoid conflict and
litigation.
o Domestic:
§ Avoids employing ‘in-house’ staff reducing overhead expenses
§ Fresh ideas and new perspectives e.g. on leadership development
§ Leaves some of the detailed or compliance-related activities to experts e.g. payroll
§ Attractive for SMEs who lack the capacity to undertake certain activities
§ Helps businesses manage functions at a more professional level of larger firms
§ Expertise can improve quality without the resource scale normally required
o Global:
§ Forms of outsourcing:
• PROCESS: repetitive, easily measured and documented work e.g. recruitment
• PROJECT: common in areas such as marketing, design, IT and research;
involves a much greater use of intellectual property and strategic business
knowledge; longer time frame, difficult to measure, quality cannot be fully
anticipated thus carrying more risk.
§ Risks of global outsourcing:
• Difficult to control the quality
• Cultural barriers like language can impact customer service
• Security issues such as confidential info leaked to competitors
• Lack of remedies for legal matters e.g. breach of contract under foreign legal
systems
-‐ Reduced costs -‐ Hidden costs
-‐ Access new networks -‐ Less integrated organisation
-‐ Expand capacity/flexibility -‐ ↓ business learning through reliance on
experts
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INFLUENCES ON HR MANAGEMENT
• Stakeholders – employers, employees, employer associations, unions, government
organisations, society
• Legal – the current legal framework
o The employment contract – common law (rights and obligations of
employers and employees), minimum employment standards, minimum
wage rates, awards, enterprise agreements, other employment contracts.
o Occupational health and safety and workers compensation
o Antidiscrimination and equal employment opportunity
• Economic
• Technological
• Social – changing work patterns, living standards
• Ethics and corporate social responsibility

STAKEHOLDERS
o Stakeholder: individual or group that has a common interest in or is affected by business’s actions
o Employers
o Influences the running of the business. Eg. decides how tasks will be performed
o Has control over employees and is responsible for paying their wages/salaries
o Employers handle HR issues on a daily basis e.g. recruitment, development programs, conflicts
o Need to put extra effort into rewards, opportunities and promotions to retain skilled staff
o Employees
o Become bored more quickly so business must provide more challenging, interesting work.
o Want to be involved in decision-making processes and have autonomy in the workplace
o Influenced by job turnover - frequently moving from one job to another is a recent trend
o Business must accommodate for employees wanting a work-life balance
o Certain groups (e.g. older workers) struggling to gain employment, but with labour shortages
looming due to an ageing population, prospects for these groups are improving.
o Employer Associations
o Act on behalf of employers in collective bargaining sessions and before industrial tribunals,
courts etc to improve their conditions. Eg. ACCI (Aus Chamber of Commerce and Industry)
§ Provide advice (e.g. awards, unfair dismissals)
§ Help negotiate agreements
§ Lobby the government and other organisations
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o Unions
o Organisations formed by employees aimed to improve wages and working conditions
o Represents and assists employees in industrial agreements and disputes
o Protect employees rights from exploitation, help maintain healthy relationship with employer
o Membership peaked in 1976 at 51% of the workforce but declined to 18% e.g. poor media image
o E.g. the Australian Council of Trade Unions (ACTU)
o Government organisations
o Governments have roles that impact human resources such as:
§ Legislator – pass laws which provide the legal framework for HR
§ Employer – pacesetters in introducing responsible HR policies (maternity leave etc)
§ Economic manager – actions to preserve economy can negatively affect HR
o Statues (laws) provide the framework for employment conditions, ensuring employers:
§ Meet award and agreement requirements (superannuation etc), WHS standards
§ Ensure no discrimination and resolve disputes
o Australia now has a national industrial relations framework, an efficient system with uniform
laws and regulations. This system implemented under the Fair Work Act 2009 (Commonwealth)
§ Gives all stakeholders the same workplace rights and obligations regardless of state
§ Includes: NES, minimum wage, modern awards, protection from unfair dismissal etc
o Industrial tribunals and courts
§ Enforce employment laws, ensures industrial action occurs according to the law
§ Functions include resolving disputes, hearing appeals, supervising the making of
agreements etc
o Federal Court
§ The federal court has a division that enforces industrial relations legislation
§ Handles cases relating to industrial action and breaches of laws (can impose penalties)
o Other government agencies
§ Many state and federal government agencies implement areas of government legislation
§ E.g. Australian Human Rights Commission (HREOC), Anti-Discrimination Board, Safe
Work Australia
o Society
o Society is increasingly concerned with fair and just working conditions (e.g. equal pay)
o Increased demand for safety and wellbeing at work, elimination of discrimination etc.
o Threats to employment or working conditions will prompt a reaction
o Global competition puts pressure on businesses to have labour that is efficient and cheap
o Many businesses relocate offshore however this is frowned upon by society as this leads to job
cuts for the original country, outsourcing also leads to unemployment.
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LEGAL – the current legal framework
o Businesses are influenced by the legal framework - Fair Work Act 2009
o Legislation covers employment contracts and agreements, dispute settling methods etc
o Shift from a strongly centralised industrial relations system 1980s to a decentralised system (without
involving tribunals) based on an increase in bargaining at workplace level
o The employment contract
o Employment contract is a legally binding, formal agreement between the employer and
employee, addressing rights and obligations of both parties.
o Verbal or written. Contains salary/wages, benefits, super, procedures, hours, location, duties etc
o Employment contracts governed by common law, awards & Enterprise Bargaining Agreements.
o Common Law (rights and obligations of employers and employees)
o Common law is developed by courts and tribunals
o Judges make decisions based on the facts of a case, guided by precedent (past decisions)
o
Employer obligations Employee obligations
§ Provide work § Obey lawful and reasonable commands of employer
§ Pay income § Carry out work with care and skill
§ Comply with IR laws § Follow procedures and policies
(e.g. fair dismissal) § Maintain confidentiality
§ Duty of care (safe work) § Give appropriate notice of termination
o Minimum Employment Standards

o Minimum 10 NES provide a safety net for employees:
§ Minimum weekly hours of work (38)
§ Flexible working arrangements – for parents with children under 18
§ Annual leave (4 weeks paid leave per year)
§ Long service leave, public holidays, notice of termination and redundancy pay.
o Minimum wage rates
o An employee’s base rate of pay for the number of ordinary hours worked
o Generally determined by award, agreement or the national minimum wage ($17.70 per hour)
o Awards
o Legally binding documents containing minimum terms and conditions of employment
o There are 112 modern awards that are categorised by industry or occupation
o Individual flexibility arrangements - employer and employee negotiate some of the conditions
in the award or enterprise agreement to address individual circumstances (e.g. working hours)
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o Enterprise Agreements
o Enterprise agreements are collective agreements made at a workplace level between an
employer and a group of employees about terms and conditions of their employment
§ May cover pay rate, penalty rates, allowances, hours of work, leave etc
§ Must be approved by the Fair Work Commission
o Other employment contracts
o Individual common law: Employer and employee negotiate a contract - less protection.
o Independent contractors: don’t have the same legal status as an employee - risk - cover own
super, tax, insurance and leave.
o Casual work: paid on hourly or daily basis - 20-25% loading to compensate for lack of
entitlements and job security
o Part time work: work <28 hours per week – access to entitlements but on a pro rata basis
o Work Health and Safety
o Work Health and Safety Act 2011 (NSW) covers employees, employers and the self-employed
o Employers must provide a safe system of work – plant and substances won’t cause harm
o WorkCover NSW may inspect the workplace and issue improvement/prohibition notices
o WC recommends employers use a 6 step approach: develop WHS policy, consult with
employees, train employees, identify hazards (e.g. inspections), implement risk control, improve
strategies with feedback.
o Workers Compensation
o Provides benefits to an employee suffering from an injury or disease related to their work
o Expensive premiums if claims are numerous, frequent or large in size – importance of
maintaining high WHS standards and auditing.
o Employers must:
§ Take out a policy with a licensed insurer
§ Keep records of time, wage, injuries, complete accident forms etc
§ Establish an injury management plan and return to work plan
§ Pass on money to the person as soon as possible
o Compensation is paid for:
§ Loss of wages for time off work (weekly payments)
§ Medical and rehabilitation expenses
§ Permanent impairment or loss of use of a body part (lump sum)
o Max penalty for false claims under NSW Workers Compensation Act= $5500 or 12 months jail
o Antidiscrimination
o Discrimination occurs when a policy or practice disadvantages a person or group of people
because of personal characteristics irrelevant to the performance of work e.g. disability, religion
o Businesses must be familiar & comply with legislation including Anti-discrimination Act 1977.
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o Employers must audit policies/practices to ensure they don’t discriminate to avoid fines, high
staff turnover or reputation damage.
o Some strategies used to eliminate discrimination:
§ Having policies with a code of conduct
§ Training employees in cultural diversity issues
§ Appoint a grievance officer and specify grievance procedures
o Equal Employment Opportunity
o EEO refers to equitable policies and practices
o Relates to recruitment, selection, training, remuneration, promotion, separation etc
o Employers with >100 employees are obliged to develop an affirmative action program (to
eliminate discrimination) in consultation with employees and to provide a progress report on
EEO programs to the Workplace Gender Equality Agency (WGEA)
o Businesses must comply with legislation such as the Workplace Gender Equality Act 2012
o They should evaluate their policies, practices and agreements for equity, train employees in EEO
awareness, keep all employees informed on opportunities, and take action to address issues.
ECONOMIC
o Economic cycle
o Economic growth/downturn changes demand for labour à affects HR managers in planning to
acquire or reduce staff
o Economic growth results in unions having a higher bargaining power so they can demand wage
increases à affects HR managers in the area of agreements
o Structural change in the economy has ↑ employment in the services sector e.g. property
o Globalisation
o Has ↑ international competition ↑ pressure for businesses attract and retain their skilled staff
o ↑ outsourcing offshore and relocating production where labour/compliance costs are lower
o Enterprise bargaining - meant many employers trade off restrictive work practices for wage
increases
o HR needs to change its management to accommodate for a multicultural workforce
o ↑ role of international orgs (e.g. ILO) which deal with HR areas (e.g. child labour)
TECHNOLOGICAL
o Technology can be used in conjunction with labour to improve productivity
o However it can lead to capital equipment replacing labour
o Telecommunication changes allows employees to work from home or offshore
o New technology increases the need for ongoing training
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o Can negatively affect work-life balance as businesses may expect employees to ‘always be on call’
SOCIAL
o In the last few decades there has been a shift from full-time to part-time employment as businesses want
flexibility - greeted favourably by those who seek a better work-life balance
o Casualization of the workforce (17% in 1992 to 35% today)
o The demand for career flexibility has increased à HR provides more flexible working conditions
o ↑ in female participation rates à HR needs to ensure flexible working conditions e.g. leave
o ↑ in participation rates of people 55+ by 10% - incentives to work longer
o Ageing workforce may lead to a shortage of skills à upskill employees through training
o Early retirement popular but many returning to part-time work for money, relieve boredom etc
o Aust has a high living standards (regular wage increases etc) à any businesswho seeks to undercut
these conditions through excessive outsourcing, moving operations offshore etc will be challenged by
unions to ensure living standards aren’t damaged
ETHICAL
o CSR considers financial, environmental and social impacts of its decisions
o HR managers should be committed to an ethical workplace culture
o An ethical framework should be developed in collaboration with stakeholders, including a code of
conduct and a code of ethics (ensure equity, legal compliance etc)
o Pleasant working enviro, good conditions, staff who feel secure, safe and valued
o Benefits: ↓ absenteeism, retention, ↓ disputes, improved performance, ↓ costs, good image
o Fair and safe working conditions are achieved through:
o Complying with social justice legislation e.g. anti-discrimination
o Complying with industrial legislation e.g. WHS, supervision, train ees
o Offering equitable rewards and benefits
o ↑ causal and part-time employment whereemployeeslack job security, have no leave entitlements etc
o Issues include dismissal, bullying, worker comp, outsourcing, sweatshops, child labour
o CSR through regular audits of factories, work with agencies to support ethical practices
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PROCESSES OF HR MANAGEMENT
• Acquisition
• Development
• Maintenance
• Separation
ACQUISITION
o Acquisition: attracting and recruiting the right staff for roles in a business
o Analysing the internal and external environment will help determine the business’s needs
o Internal e.g. business goals, performance, culture, structure, productivity
o External e.g. competition, technology, economic trends, legislation, social factors
o Job analysis and job design undertaken - staff interviews, observations, reports etc used
o Job specifications (qualifications, skills) and job descriptions (duties, tasks, responsibilities)
o Recruitment is locating and attracting the right quantity and quality of staff to apply for employment
o Selection gathering info about applicants e.g. interview, testing to choose the most appropriate applicant
o Effective recruitment and employee selection involves:
o Hiring qualified, motivated applicants whose values and goals align with the business
o Having a fair, non-discriminatory and legally compliant selection process
o Giving applicants a realistic understanding of their job and responsibilities
o Identifying gaps in skills, recruit to fill gaps - helps with placement
DEVELOPMENT
o Development: enhancing the skills and knowledge of employees 1
o Induction: Programs to introduce new employees to their job, co-workers and the business
o Training: Ongoing due to changes, to improve work performance to stay ahead of competitors
o Organisational development
o Flatter organisational structures enable employees to share innovative ideas and solutions
o However, it reduces promotional opportunities with reduced levels/roles
o So instead, strategies to motivate and retain staff are:
§ Job enlargement – increase breadth of tasks in a job
§ Job rotation – move tasks from one to another over time to multi-skill employees
§ Job enrichment – increase an employees’ responsibilities
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§ Self-managing teams – roles and decisions determined by members
o Mentoring and coaching
o Mentor transfers knowledge in preparation for future roles, shares advice/experience
o Individual mainly benefits - personal growth achieved, enhanced morale
o Coach improves skills and helps manage specific work roles better, shares techniques etc
o Business benefits with improved performance
o Performance appraisal
o Performance appraisal: assess an employee’s performance against criteria or standards
o Tools e.g. interview, essay evaluation, behaviour observation scales, 360-degree feedback
o Four main objectives:
§ Provide employees with feedback on their performance
§ Act as a measurement to determine possible promotion or pay rise
§ To help the businesses monitor its employee selection
§ Identify training and development needs
o If employees underperform, then selection processes may change, extra T&D may be required,
they should be given a formal notice, be provided with advice and opportunities to improve.

MAINTENANCE
o Maintenance: looking after employee’s wellbeing, health, safety, managing communication, complying
with industrial agreements and legal responsibilities
o Communication and workplace culture
o Open communication helps build a positive workplace culture and prevent conflict escalating.
o Employee Participation
o Employees more committed if they can make decisions and have control over their work lives
o Business benefits from employee experience and knowledge, their suggestions can help business
succeed, and build a sense of shared purpose and company identity.
o Some strategies:
§ Membership on the board of directors – employee represents staff
§ Ownership – buy shares in the business increasing commitment
§ Team briefings – find solutions together
§ Employee surveys – seek feedback from employees on ways to improve the business
o Benefits
o Monetary (e.g. salaries, commission) or non-monetary (e.g. company car, annual leave)
o Benefits/flexible working arrangements improve workplace culture and attract/retain staff
o ‘Family friendly’ workplace: job sharing, flexible hours, maternity leave, child care, support.
o Controlling costs of: low morale, absenteeism, court action, loss of return on training
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o Legal compliance and CSR
o Employers are required by law to ensure HR procedures/policies comply with discrimination
legislation, social justice and industrial relations legislation, WHS
o Bullying, harassment, conflict, high workloads à stress, absenteeism, turnover, ↓ productivity
o Staff must be respectful, professional, fair and considerate.
o Implement preventative strategies e.g. bullying - provide info, train employees in company
policy, handle complaints appropriately.

SEPARATION
o Voluntary: redundancy, resignation, retirement
o Involuntary: redundancy, retrenchment, dismissal, contract expiring
o Redundancy – job no longer required e.g. technological replacement, low demand etc
o Retrenchment – lack of work, business can’t justify paying you anymore
o Managers should consult employees prior to termination and support them with outplacement to
ensure a smooth transition that does not affect remaining employees morale and productivity
o Notice, leave entitlements etc must comply with awards/industrial agreements/legislation
o Dismissal
o The Fair Work Commission determines whether reasons are sufficient and appropriate
o Employers must prove they have followed procedures with documenting evidence
o Serious misconduct - employer investigate allegations, allow employee to respond
o Poor performance - give employees written warning, advice and support so they can improve
o Redundancy - employer must show job is no longer needed, there is no other available work,
employee was consulted about alternative redeployment options in the business
o Unfair dismissal
o Unfair dismissal: employee believes the dismissal action is harsh, unjust or unreasonable
o Claim resolved through informal conferences or formal hearings
o Either resolved with reinstatement or compensation
o Avoid this by hiring casuals and contractors or having tight employment contracts including job
description, probation periods and measureable targets to allow for dismissal
o Unfair dismissal are expensive, lengthy and create bad publicity
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STRATEGIES IN HR MANAGEMENT
• Leadership style
• Job design – general or specific tasks
• Recruitment – internal or external, general or specific skills
• Training and development – current of future skills
• Performance management – developmental or administrative
• Rewards – monetary and non-monetary, individual or group, performance pay
• Global – costs, skills, supply
• Workplace disputes
o Resolution – negotiation, mediation, grievance procedures, involvement of
courts and tribunals

LEADERSHIP STYLE
o Leadership style is the way managers communicate with their employees to achieve the business’ goals
o Autocratic or authoritarian: directive approach where managers generally make decisions
without input from employees. Works well with unskilled or inexperienced workers who need to
be instructed and controlled, or when decisions need to be made quickly.
o Participative or democratic: consultative approach where employees are engaged in the
decision-making process to make use of their ideas. Sense of ownership. Work together.
JOB DESIGN
o Job design includes setting out the number, kind and variety of tasks a worker will be expected to carry
out in the course of performing their job.
o Specific tasks - includes job specialisation which can improve efficiency, however can also lead
to boredom and dissatisfaction with routine and repetitiveness.
o General tasks: a greater variety of tasks, generally increasing skill level and satisfaction.
o Job rotation – employees switch from one task to another, gaining more skills
o Job enlargement – given more tasks within the same job
o Job enrichment – employees given more control over how they do their work
o The right method and elements can INCREASE engagement, satisfaction and productivity as a result
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RECRUITMENT
o Source/method used depends on recruitment goals, business policies, labour market conditions etc
o Poor selection leads to ↑ costs (e.g. training), low performance and industrial unrest (if the job does not
meet applicants expectations), ↑ absenteeism and staff turnover, ↑ accidents or defects
o As businesses are becoming more global they should have a diverse workforce
o Internal recruitment involves filling job vacancies with people from within the business. Applicants
invited to apply through intranet postings, word of mouth, email etc
o External recruitment involves filling job vacancies with people from outside the business. Achieved
through advertisements (especially social media) and referrals from recruitment agencies etc
Internal Recruitment Advantages Internal Recruitment Disadvantages
-‐ Recognises and rewards staff -‐ Can lead to rivalry for positions
-‐ ↑ their commitment -‐ Unsuccessful applicants demotivated
-‐ Productivity maintained as the applicant -‐ Limited value and skills added
is already familiar with the operations -‐ Limited new perspectives and insights
-‐ Cheaper and less chance of failure as the
business trusts the applicant already
External Recruitment Advantages External Recruitment Disadvantages
-‐ Wider applicant pool -‐ Lost productivity in the initial phase
-‐ New ideas and skills may produce better -‐ Recruit may not fit the business culture
solutions to the businessproblems -‐ Takes a lot of effort and time to induct
-‐ Prevents internal rivalry them into job
o General skills - HR may target applicants with general skills that are a good cultural fit for the business.
The job can be customised to suit the recruits, and recruits can be trained and developed according to
the business’s needs. Key general skills include flexibility, versatility, social confidence, a positive
attitude, motivation and an ability to work as a team or independently.
o Specific skills - HR may target applicants with specific skills to fill the skill shortages in the business.
Specific skills are highly specialised. May recruit overseas or outsource to overcome skill gaps.
TRAINING & DEVELOPMENT

o Training aims to develop skills, knowledge and attitudes that lead to superior work performance
o Development is enhancing an employee’s skills to assist the current and future needs of the business
o Effective training and development programs ensure valued staff are retained
o Employees can be satisfied by opportunities to develop a career with the business
o Need to consider current skills needed and future skills necessary for business growth
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PERFORMANCE MANAGEMENT
o Performance management addresses both individual and businesses performance.
o Developmental model focuses on using data to develop the individual skills and abilities of employees,
so they improve in their roles. Periodic feedback and shared discussion.
o Administrative model focuses on using data to assess business progress and identify areas for
improvement (e.g. training, rewards). Improve HR and ensure individual and business goals are aligned.
Developmental benefits Administrative benefits

-‐ Indicates effectiveness of selection process -‐ Identifies strengths and weaknesses
-‐ Provides employees with feedback -‐ Finds areas for productivity improvement
-‐ Helps identify and retain potential leaders -‐ Evaluates rewards and benefits programs
o Important to create a shared vision of the strategic direction of the business between employees and
employers, to establish clear performance expectations and standards, have a formal review process.
REWARDS
o Rewards can reinforce a business’s culture, values and help achieve its strategic objectives.
o An effective rewards system can attract, motivate and retain employees, but should be equitable,
relevant, cost effective, simple to administer and align with business goals.
o Monetary rewards:
o Direct (cash) - base pay, incentive pay (bonus, commission), allowances (overtime)
o Indirect (benefits) - insurance, flexible work schedules, holidays
o Non-monetary rewards:
o Job - interesting work, challenge, responsibility, recognition, opportunities, promotion
o Environment - good HR policies, safe and healthy work enviro, fair treatment, job security
o Increased use of teams call for team based rewards such as ‘gain sharing plans’
o Key issues to consider when designing a reward system for the business or employees:
o Economic conditions – demand for labour
o Competitors rewards
o Awards, agreements, NES
o Performance – incentives for performance above standards or criteria, bonus etc
o Job – role and level of responsibility etc
GLOBAL
o Globalisation and technological developments have increased the complexity of HR management
o Cost: Overseas labour may be cheaper than domestic labour. Businesses may restructure workforce and
outsource to lower-labour-cost countries. Need to train overseas employees on quality standards etc
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o Skills: In Australia, the skills possessed by workers don’t match the skills needed by businesses. HR
may need to upskill local workers internally or turn to workers overseas who have the skills needed.
o Supply: Australia has a relatively small labour ‘supply’. Other countries have an abundance of workers
so Australia allows them to migrate and work here. HR managers have more choice and diversity.
o Cultural awareness and language training may be needed to foster effective communication
o Staffing approaches:
o Ethnocentric - home country manager, parent company in senior management positions
o Polycentric - employs local manager, host country locals given senior management positions
o Geocentric - employs manager based on merit, conducts global search for senior managers
WORKPLACE DISPUTES
o Industrial dispute: disagreement over an issue between an employer and its employees
o Common causes of disputes:
o Remuneration – wages, allowances, entitlements, superannuation
o Employment conditions – working hours, leave, benefits
o Job security – retrenchment, downsizing, restructuring, using contractors, outsourcing etc
o Health and safety – physical working conditions, worker compensation
o Managerial policy - discipline, discrimination, promotion, production quotas etc
o Union issues – employer approaches to the union, inter and intra union disputes
o Political or social protests
o Forms of industrial action:
o Covert à absenteeism, turnover, go slow, sabotage (vandalism, disrupt production),
discrimination, harassment, exclusion from decision-making etc
o Overt à strikes, pickets, stop-work meetings, work-to-rule (refuse to do unspecified-in-contract
duties eg. overtime), lockouts, transfer employee to different departments, dismissals
o Can lead to low productivity, high absenteeism, high staff turnover, legal claims, costs etc
o Minimise through collaborative working relationships, training staff in managing disputes etc
o Resolution
o Key stakeholders involved in resolving disputes are employees, employers, trade unions,
employer associations, governments, courts and industrial tribunals
o Three processes:
§ A negotiated outcome – the parties work out the solution for themselves
§ A mediated outcome – an independent mediator assists with an agreement
§ An arbitrated/adjudicated agreement – an independent arbitrator or court determines
how the matter will be resolved and makes a legally binding contract
o Must prove both parties have tried to bargain in good faith before protected industrial action
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o Negotiation
o When discussions between parties result in a compromise and a formal/informal agreement
o Can benefit parties by ↑ their knowledge of company policy, objectives, workers concerns etc
o Mediation
o The confidential discussion of issues in the presence of a neutral/objective third party.
o The third party could be independent or a representative from a government agency (e.g. FWC)
o Grievance procedures
o Are formal processes to resolve disputes - generally written into an award or agreement
o Effective grievance procedures require a full description of the complaint made by the
employee(s). The person the grievance is made against should be given details of the allegation
and an opportunity to provide their view.
o Involvement of courts and tribunals
o Occurs when disputes that have passed their nominal expiry date, bargaining has commenced
towards a new agreement, negotiations have failed etc
o Conciliation is where a third party helps the two parties reach an agreement
o The Fair Work Commission will appoint a conciliation member to hear both sides of the dispute
o The member may require parties to continue negotiations, reduce the ambit of the dispute or
develop other strategies to resolve the dispute and then report back for another conference
o If this fails arbitration occurs where a third party hears both sides of a dispute in a more formal
court-like setting and makes a legally binding decision based on the evidence
o Common law action is open to any party involved in or affected by industrial action, who may
have made direct claims for damages caused by actions, or for a break of contract
Benefits of industrial conflict Costs of industrial conflict

-‐ Issues finally get managements attention -‐ ↓ production, sales
-‐ Better working relationships due to -‐ Damaged reputation, lose customers or
better understanding of work problems investors
-‐ Changed work practices can benefit -‐ Business may experience closure
employees and the business as a whole -‐ Legal costs and fines
e.g. better WHS -‐ Absenteeism, accidents, defect rates ↑
-‐ Governments may reform policies in -‐ Working relationships damaged
response -‐ Stress and lower staff morale
-‐ ↑ productivity and ↓ turnover etc when -‐ Community bitterness towards business
dispute is resolved
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EFFECTIVENESS OF HR MANAGEMENT
• Indicators
o Corporate culture
o Benchmarking key variables
o Changes in staff turnover
o Absenteeism
o Accidents
o Levels of disputation
o Worker satisfaction
INDICATORS
o Role of HR is to link individual performance with corporate strategy
o Business can modify processes and strategies through performance management
o Indicators are performance measures to evaluate organisational and individual effectiveness
o Corporate culture
o Corporate culture: values, ideas, expectations and beliefs shared by business members
o Positive corporate culture and positive working relationships à productivity
o Poor corporate culture - high turnover, poor customer service, absenteeism, accidents, disputes
o Ultimately poor business performance, lower sales and lower profits
o Depends heavily on communication systems and employee participation
o Have rewards, flexible work practices, training, collaboration, culture of trust, fun atmosphere
o Benchmarking key variables
o Compare business performance between internal sections of a business or between businesses
o Aim is to then initiate change for improvement
o Informal benchmarking e.g. informal discussion with colleagues of other businesses, research
best practice online and attending conferences
o Performance benchmarking comparing performance levels with other businesses
o Best practice benchmarking comparing performance levels with a ‘best practice’ business
o Balanced scorecard benchmarking measures whether business activities are meeting
objectives established in the strategic plan. Benchmarks key performance variables with targets.
o HR audit can systematically analyse and evaluate HR activities and their effectiveness
o Quantitative data (e.g. sales per employee)
o Qualitative info – feedback and research on key issues (e.g. surveys)
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o Changes in staff turnover
o Rate at which staff leave the business (Average 12-15% per year with around ½ being voluntary)
o Benchmark against other businesses in the same industry as rates varies between industries
o Determine reason for leaving - ‘pull’ (external factors) and ‘push’ factors (internal factors)
o May leave due to lack of opportunities, toxic workplace culture, low pay, boredom etc
o Turnover costs high (e.g. payouts for entitlements, recruiting and training new staff)
o Loss of productivity, corporate skills and knowledge etc
o Absenteeism
o Average rate of absences on an average day without sick leave or leave approved in advance
o High levels of absenteeism or lateness make indicate worker dissatisfaction or conflict
o May also be due to poorly designed jobs or lack of a strong employer-employee relationship
o Costs of hiring more staff to fill in, work disrupted, lower productivity
o Accidents
o Primary and secondary jobs (tradespeople etc) more likely to have accidents
o Vehicle accidents, workplace violence, falling objects, slipping, overexertion etc
o Direct (compensation etc) and indirect costs (lost time, repairs, fines, lower morale etc)
o Benchmarked internally e.g. number of WC claims involving the loss of 1 or more working
weeks
o Levels of disputation
o A large number of formal grievances reports are indicative or poor quality relationships
o Investigate whether issues relate to policies/process or specific individuals etc
o Disputes are more common in larger businesses as relationships and communication between
employees and management is less personal and the scope for mistrust and misunderstanding is
greater
o Worker satisfaction
o Whether employees are content with their workplace
o Surveys etc to understand how staff feel about their work, management and the business culture
o Can then improve management style, rewards system, working enviro, wellbeing facilities (e.g.
gym), family friendly arrangements etc
o Employees with good relationships with co-workers, enjoy their work activities, receive relevant
training and gain opportunities for promotion are likely to be satisfied and stay with the bus
o Effective leadership and management –employees recognised etc
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H SC Business

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MALIA CRAWFORD

BUSINESS STUDIES HSC TOPIC 1

o Operations and the customer focus

STRATEGIC ROLE OF OPERATIONS MANAGEMENT

GOODS/SERVICES IN DIFFERENT INDUSTRIES

INTERDEPENDENCE WITH OTHER KEY BUSINESS FUNCTIONS

MAIN INFLUENCES ON OPERATIONS MANAGEMENT

CORPORATE SOCIAL RESPONSIBILITY

Variety: refers to the range of products made Low: milk

Variation (in demand): the amount of a Low: petrol

Visibility: also referred to as the nature of Low: supermarkets

o Critical Path Analysis (CPA)

SUPPLY CHAIN MANAGEMENT

Advantages of holding stock Disadvantages of holding stock

o Economies of scale: higher demand in product requires larger scale production.

STRATEGIC ROLE OF MARKETING GOODS AND SERVICES

INTERDEPENDENCE WITH OTHER KEY BUSINESS FACTORS

Type Definition Example

Industrial Purchases products to use to create LG buys metal to make TV’s

Consumer Sells to individuals for personal use

Niche Specialised goods and services. Specialised magazines

FACTORS INFLUENCING CUSTOMER CHOICE

IDENTIFYING TARGET MARKETS

DEVELOPING MARKETING STRATEGIES

IMPLEMENTATIONS, MONITORING AND CONTROLLING

MARKET SEGMENTATION, PRODUCT AND SERVICE DIFFERENTIATION, POSITIONING

o The Communication Process

STRATEGIC ROLE OF FINANCIAL MANAGEMENT

OBJECTIVES OF FINANCIAL MANAGEMENT

INTERDEPENDENCE WITH OTHER KBF

INTERNAL SOURCES OF FINANCE

EXTERNAL SOURCES OF FINANCE

Placements Allotment of shares at a discount made directly from business to

o Private equity: Money invested in a private company.

GLOBAL MARKET INFLUENCES

PLANNING & IMPLEMENTING

MONITORING & CONTROLLING

o Working capital ratio

o Profitability = business earning performance

NET PROFIT RATIO/MARGIN = NET PROFIT X 100%

ACCOUNTS RECEIVABLE = ACCOUNTS RECEIVABLE X 100%

o Round up to the nearest whole day

LIMITATIONS OF FINANCIAL REPORTS

ETHICAL ISSUES RELATED TO FINANCIAL REPORTS

Why is financial management important?

CASH FLOW MANAGEMENT

GLOBAL FINANCIAL MANAGEMENT

STRATEGIC ROLE OF HUMAN RESOURCE MANAGEMENT

INTERDEPENDENCE WITH OTHER KBF

o Minimum Employment Standards

TRAINING & DEVELOPMENT

Developmental benefits Administrative benefits

Benefits of industrial conflict Costs of industrial conflict

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