Business Studies HSC 2022 - 2023

Resources
flashcards:
https://quizlet.com/platipie23/folders/hsc-business-full/sets

textbook:
https://pdfs.jacplus.com.au/secure/resources/BusinessStudiesinActionHSC6e/Busine
ssStudiesinActionHSC6E.pdf

hsc exam pack:

https://educationstandards.nsw.edu.au/wps/portal/nesa/resource-finder/hsc-exam-
papers/2022/business-studies-2022-hsc-exam-pack

essay resources:
https://artofsmart.com.au/business-studies/hsc-business-studies-essay/

CONTENTS 1

OPERATIONS 2
role of operations management 2
influences 4
operations processes 8
operations strategies 12
FINANCE
role of financial management
influences
financial processes
financial strategies
MARKETING Error! Bookmark not defined.
role of marketing
influences on marketing
marketing processes
marketing strategies
HUMAN RESOURCES
role of human resources
key influences
hr processes
hr strategies
effectiveness of hr
headings
case study
writing queues

overall feedback on writing

- plan better
- make sure it makes sense
- more theory and better stimulus related explanation
- don't repeat the question in the point – say the answer

OPERATIONS
https://quizlet.com/au/764427658/flash-cards/

role of operations management

● strategic role of operations management – cost leadership, good/service
differentiation

Holistic/ Long-term/ Overarching contributions to the production of goods and

services and value adding IN ORDER TO ACHIEVE short term - operational
objectives and long term profit maximisation, competitive advantage and product/
service differentiation cost leadership.

Cost; when a business is able to produce its product at lower cost through - exploit
economies of scale, efficient operations, pricing strategies, tech

Differentiation; where a business is able to differentiate its product from the

competition such that customers perceive superior value through - superior
product quality, branding, wide distribution, promotion convenience, packaging.

McD’s competitive advantage: Primarily cost leadership - low profit margins and vast
economies of scale, cheap inputs but also high quality products. Lowest in the
market.
Differentiation is achieved through customisation, dependability of their goods in
worldwide restaurants and consistent quality and speed.

Quality Meeting product design + customer 2% increase

expectation. Monitor freshness +
Quality of: source high quality inputs
Design - functionality + durability, Improve customer
Conformance - prescribed standards satisfaction index scores
Service - reliability + response of service
 Flexibility How quickly processes can react to 5% improvement during
market changes, adaptability e.g. scale peak service -
up production. Measured by variations fragmentation of
in wait, lead and processing times in production ( holiday
peak/ off-peak periods. season increase ).

Customisa Ability of a business to produce 1:25 orders customised

tion individualised products to meet specific New product ranges for
customer needs e.g. increase range, different markets
varied by colour, functionality and size (
variety and volume )

Cost Minimisation of COGS + expenses to 5% decrease

achieve cost leadership + increase Martin Brower agreement
retained profits - measured in prof ratio to lower input costs,
analysis, variations in input costs wages reduction through
tech ( kiosks )

Dependabi How consistent and reliable a business’s 5% reduction in product

lity products are: warranty claims/ returns + faults, avoid any returns
wastage

Speed How efficient the transformation process 3% increase

is regarding time taken fo Streamline processes,
convenient process layout

● goods and/ or services in different industries

Goods are tangible, can be standardised and customised, production and

consumption varies, value is determined by the input costs e.g. labour
- Burgers, drinks, fries, desserts
Services are intangible, production and consumption is simultaneous and Value is
determined by skills/ expertise
- Drive thru, delivery, wi-fi, sit-in service

Standardised goods are mass produced with uniform quality + conformance while
customised goods are varied according to the needs of customers > produced with a
market focus. McD uses standardised inputs which can then be customised and is
part of the Quick Service Food Industry.

Perishables spoil, decay or become unsafe in a short period of time e.g. fresh fruit
and vegetables, other foods, medicine
- High standards of quality and cleanliness
- Short lead times and distribution
- Appropriate packaging and storage
Non perishables are the opposite - don’t require specific storage requirements
- Effective inventory management
- Helps maintain aspects of quality
 ● interdependence with other key business functions
Mutual dependence/ affect that the key function have on one another. Each function
area depends on the support of the others if it is to perform a capacity
- TWO- WAY relationship
- Have separate sentences for each relationship

Interdependence Operations McDonald’s

Finance > Op Supports T.P & Sourcing Payment of accounts with

and allocating capital to Martin Brower, source and
stock purchase, D+E, upgrade kitchen machinery +
machinery, space, R+D loans

Op > Finance LPEGS similarity, profit Store revenue contributes to

maximisation through comp. financial profitability -
Adv, financial stability and producing high quality + cost
generation of sales competitive goods

Marketing > Meets design brief - sell Perform the necessary market
potential, unique features ( research - determine nature of
BEST possible ) + product goods/ services. Inventory
costs influence pricing management package
handling

Marketing benefit Discovers what is in Meets customer expectations

demand, tailor processes
and packaging determined
then produced by op.

Human Resources Determines job description Train and maintain the casual
reliance and specifications, nature of workforce - speed +
the work and quality dependability of workers = TP
objective efficiency

Human Resources Provide skilled and Determine job design, day-to-

benefits experienced workers to day tasks
operate PP. Proper training/
up productivity organisation

influences
● globalisation, technology, quality expectations, cost-based competition,
government policies, legal regulation, environmental sustainability

Globalisation - Process of interconnectedness due to overseas buying and selling.

This can be both advantageous or a threat to businesses. Main terms: Supply chain (
range of suppliers ) and global web ( network of suppliers )
 ● Positive impacts mean expanded markets, cheaper materials ( global
sourcing strategy ), Access to labour e.g cheap labour in developing
countries, New tech, Economies of scale. Covid.
● Globalisation has given McDonalds the ability to expand and to open
restaurants around the world ( more than 36,000 restaurants ).
● Negative impacts; increased competition, increased unemployment,
environmental and social issues, increased volatility, exposure to SCM issues
● Greater competition for McDonalds.

Technology - The design, construction and or application of innovative devices,

methods and machinery upon the operations processes. Includes sourcing,
manufacturing and distribution and is an external influence

Administration: Planning tools e.g scheduling, office technologies e.g. smartboards,

software e.g. excel, illustrations, graphing

Operations: Large machinery particularly for an assembly line, robotics to reduce

human error, CAD and CAM

● Main effect is changes in the technological environment ( if talking about

technology as an external influence ), offering RISKS, THREATS,
OPPORTUNITIES, cost, communication, productivity, consumer base,
collaboration and sourcing
● Positive impacts are more efficient + quality processes, new methods of
transformation, access to more information/ ideas, mass production to
increase economies of scale ( robotics ), broader range of output or
customisation > competitive advantage
● Challenges involve existing products/ processes becoming obsolete, slow,
placing business at a disadvantage, expensive to upgrade and keep up,
increased competition depending on how efficient the process
● Opportunities: cost reduction through speed and consistency/ dependability
● Threat: Loans, capital investment, more training and acquisition for operating
labour
● Technology to improve Operations: LED’s to reduce energy consumption and
TP costs, automation of many processes e.g. drink dispensers, customer
notification board → improve customer contact

Quality expectations - Ability to conform to meet customer expectations,

distinguishing features. How well designed, made and functional goods are and
overall degree of competence e.g. functionality, service etc. Adherence to people’s
inherent beliefs regarding quality determine the level of satisfaction
● Benefit, proper customer contact and research and design will be rewarded
and help retain customers = cash flow, satisfaction = perceived value.
● McDonald’s quality of food is determined by other fast food restaurants
 ● Cost in terms of implementation of quality strategies, loss of competitive
advantage if not met, research + development costs
● 2011 - reported in the news for it’s coffee not meeting an acceptable standard,
spent money trying to improve barista training
● Might face loss of customers especially if an important expectation isn’t met
e.g. food poisoning, late

Cost-based competition - Occurs in price-competitive markets when rivals seek to

create cost advantages relative to each other so they can charge lower prices/
achieve greater profit margins. Influential if a cost leadership strategy is decided
and usually increasing the price is not an option.
● Threats: Erosion of profit margins through competition, balancing cost and
quality, place businesses under pressure, must change according to other
businesses
● Opportunities: Source of a competitive advantage, pressure encourages
efficiency, innovation and volume of output
● Main competitor: Yum Brands - KFC + Pizza Hut

Ways this can be dealt with: ( Fixed costs: constant ( can’t be changed as easily ) or
variable costs ) Ensuring resources are optimised, streamlined transformation
process, updating facilities, training workers, sourcing cheaper inputs through
strategies.

Government policies -

Government policies change depending on the government or social expectations.

They create incentives that then result in legislation changes ( policies reflected in
laws ). Effect on operations: a source of change. E.g. taxation rates, work health
safety standards, tariffs on imported goods ( expressed in legal regulations/ policies
), usually limited to an incentive.
● Affects operations decisions, source of change. Some restrict practices while
others encourage businesses and provide opportunities
● Meat patty goes through a total 52 checks before actually arriving in a
McDonald’s restaurant - ensure food safety + meet standards/ policies by
altering task design e.g. Aus NZ Food Standards Code

E.g Current labour government has taken a strong stance on climate change, needs
to be taken into account in preparation for possible environmental policies?

Legal Regulation - Must comply with certain laws shaping business practices and
procedures, the cost associated with meeting these requirements are called
compliance costs. E.g Zoning affects location, Taxation affects cost/ market, Work
pay affects HR expenses etc., Employment relations, Environmental policies.
 ● Positives of compliance; Avoid additional costs, minimise disruption, avoid
intervention, brand image undisturbed ( Negatives - the opposite costs,
disrupt, intervention, image ).
● Generic examples for q’s about other businesses;
● Work Health and Safety Act 2011 ( protection, safety, insurance, regulations ).
● Meat patty goes through a total 52 checks before actually arriving in a
McDonald’s restaurant - ensure food safety + meet standards/ policies by
altering task design e.g. Aus NZ Food Standards Code

Environmental Sustainability -

an increasingly important concern, businesses are under pressure to undertake

environmental initiatives and shape their operations processes around sustainable
processes. E.g such as using renewable resources for global warming

● Pressure from customers and society to produce more sustainability

● Involves changing processes
● Inputs, reducing waste, technology
● Can be a point of differentiation = competitive advantage

E.g ditching plastic straws, 83% of the packaging is fibre based, 100% comes from
recycled, renewable or certified sources, Energy efficient restaurants through motion
sensitive lighting. Environment - Environment Protection and Biodiversity
Conservation Act 1999

● corporate social responsibility

Open and accountable business actions outside of legal requirements but

considering the impact on broader society.
Triple bottom line - corporate decision making is not just profitability but
responsibilities within the community ( which can then in turn improve profitability
through positivity )

- the difference between legal compliance and ethical responsibility

Legal compliance Ethical Responsibility

Process by which an organisation The ability to recognize, interpret and

observes and complies with the external act upon the principles, values and
statutory laws and regulations standards deemed acceptable by the
community.

52 checks of
 - environmental sustainability and social responsibility

Some issues relevant to the operations process include:

Increasing environment concerts and sustainability - choice of inputs, manufacturing

processes e.g. machinery with emissions and land degradation

Discrimination concerns - respects all cultures/ identities, fair workplace with

diversity, no indirect discrimination in terms of product
- affects the assets of human resources and product features/ design may be
offensive etc.

Accessibility/ inclusion e.g. food for vegetarians/ vegans/ halal or store layout e.g.
ramps, clothing sizes from small to triple XXX for all sizes,
- affects customisation/ resources and construction of the store

( Mostly covered in influences above )

“People” section of the McDonald’s online site

- A fair workplace, everyone treated equally, safe space and EEO ( equal
employment opportunity ) and no bullying etc.
- Diversity and inclusion
Ronald McDonald House- 18 houses that keep families close to the hospital and
provide other essential care, to support the needs of seriously ill children and their
families.

operations processes
● inputs

Start of the transformation process e.g are converted by or carry out operations
processes. Some are already owned, others are bought by suppliers.
Vital for profitability and cost reduction.

- transformed resources (materials, information, customers)

Resources or inputs that are converted in the operations process.
- Materials: raw materials or intermediate goods, physically make up the final
product
- Information: Knowledge from research results in market understanding
influences product produced, access innovation Internal + External
- Customers: choices and opinions shape the T.P marketing = crucial role,
consumer orientation to provide them with the best product
- Customer relationship management ( CRM ) - better understand customer
needs/ wants - maintain contact with customers. Involves research and helps
provide them with the best product - customer oriented, increased sales,
differentiation, customisation.
Case:
- Materials: Beef, chicken, lettuce, onion, oil, sugar, potato, paper, plastic
mostly intermediate e.g. bread from supplier - aritzia.
- Information: Internal = Sales data, performance measure ( both direct and
indirect ) External = Shifts is taste and preference, government agencies etc.
- Customers: demand for higher quality, MyMaccas app provides knowledge on
behaviours to help develop new and existing products. Customer satisfaction
index!

➢ transforming resources (human resources, facilities)

Carry out the transformation process and include
Human resources: Human capital inputs into a business, all workers ( greatest
asset ). Most expensive input - affects profitability and quality the most. Skills/
knowledge/ capabilities and experience is valuable, working style impacts T.P. as
well as management. Many challenges in recruitment and training and selection and
alignment with business goals.
- HR: Customer service, cooking, assembly and cleaning. Managed through
trainers, managers.
- Facilities: The plant ( factory or office ) and machinery used in te operation
process, assisting people converting inputs. Quality work environment.
- Restaurants, hotplate, cookers, toasters, utensils, cash register, coffee,
drinks. Managed through live telemetry, Kitchen Video Screens, online
ordering, training kitchens and technology.

● transformation processes

- the influence of volume, variety, variation in demand and visibility (customer

contact)
 Four V’s Theory McDonalds

Volume How much of the product, ability Sell high volumes at a narrow
to achieve volume flexibility, profit margin, 1.7 million
customers every day in
adjust to demand. Speed and
Australia, Both range through
flexibility - indicators. customisation + deal with a
range of inputs. More sales =
more cash flow, economies of
scale.

Variety The mix of products or services, Since 2007 - a 70% increase in

range and variety ( marketing the variety of products, large
determines it ). Greater variety = variety of outputs ( both
harder production processes. tangible and intangible ).
Customisation indicator. Attract more customers -
increased market share.

Variation During periods of variation in Massive supply chain must be

demand, peaks can put pressure able to take many inputs.
on the transformation process. In store flexibility for peak
Suppliers/ labour + machinery. A hours/ times ( holidays ) =
decrease can also affect more labour/ speed increase +
profitability + inventory. maintain quality.
Flexibility. COVID-19 = bread + milk at
drive thru

Visibility Contact that a business has with Paradigm shift from production
its customers, how open and to consumer oriented
transparent. Also customer operations processes.
feedback methods e.g direct (
survey ), indirect ( data ). Direct contact = Online
surveys/ In-store feedback/
Shapes what businesses make, Service.
the way they make it and
ensures perceptions are met. Indirect = Kiosk and App data +
Cost, Quality, Dependability, measurement of sales.
Flexibility

- sequencing and scheduling – Gantt charts, critical path analysis

Sequencing refers to the order which activities occur

Scheduling is the length of time activities take
- Strict assembly line sequence to promote operational efficiency e.g. toast bun
11 seconds, cook 22 seconds etc.
Planning tools include:
Gantt Charts; record the number of tasks and estimated times ( doesn’t show
relationship between ). Forces measurement of planned vs actual times.
Visual tool, keeps business on track, helps manage resources.

Critical Path Analysis; Handle complex and time-sensitive operations, shows what
needs to be done/ how long and order ( shows relationship ). Critical path =
shortest time to complete all tasks so longest time path.
Helps reduce risks and costs, careful assessment, proactiveness, cash flow forecast
Disadvantages: Only assumptions, doesn’t guarantee success, might become
complicated.

Improves efficiency and use of resources ( both workers and materials ) > reduce
cost of goods sold > achieve cost leadership > winner

- technology, task design and process layout

Technology is the application of science or knowledge that enables people to do new

things in new and better ways. Helps business operations to be more effective and
efficient. E.g Robotics, CAD, Manufacturing.
- Increase productivity ( speed + output , reduce costs ( cost leadership ),
point of difference e.g in service ( differentiation ), gain competitive
advantage ( profitability ).
- Problems: High capital cost, requires outlay/ maintenance and constant
updating. McDonald’s leases technology → expense.
McD uses mass toasters/ double sided grills/ food warmers and software that
displays orders. KVS. It also uses Point of Sale tech such as kiosks.

Task Design - classifying job activities in ways that make it easier to complete a task
towards a final goal ( op and HR ) Breaking down the work e.g. grill buns.
Skills Audit - find present level of skills + shortfalls.

Process layout is where machinery is organised in function. Layouts must promote

workflow, efficiency and correct sequence. E.g. freezer area, drinks area, fries
area and separate space for McCafe due to different inputs.
Product layout = assembly line e.g. on the tabletops for burger assembly - enable a
‘Made for You’ system. Speed, efficiency, flexibility
Process flows and smoothness of transitions between transforming processes.
Efficiency = greater output per input.

- monitoring, control and improvement

Relates to TQM. As well as KPI’s.

 - Monitoring: measuring of planned vs actual performance e.g. actual stock vs
ordered, defects against estimated defects, actual volume capacity vs design,
times over expected times.
- Control: assessment of targets + immediate corrective actions e.g.
technology, different layout, more casual workers.
- Improvement: systematic changes ( removal of bottlenecks - backlogs/ slow
parts of the T.P ) e.g. paradigm shifts, made for you system,
- Real-time performance data, KVS colour coded based on speed for an order
to be fulfiled

● outputs
Operations’ purpose is to produce outputs of both tangible goods ( finished & semi-
finished or intangibles such as service or warranty or customer service.

- customer service
Intangible that requires extensive customer contact, often a source of a competitive
advantage, provided before ( taking an order ), during and after a purchase.
Technology is also changing how services are delivered ( self-serve kiosks of
McDonalds ). Friendly drive thru and cashier service- customer experience at the
forefront of their mission.
- Involves: handling returns, answering questions + info, communication,
anticipating needs, complaints and using technology for 24hr contact.

- warranties
An assurance that a business stands by the quality claims of the product they
provide to the market. ( Warranty claims: defects caused by the T.P - dependability ).
These claims help identify issues in the T.P or inputs.
- Promises referring to quality, state, performance, what and for how long,
servicing availability. Free from defects or faults?
Automatic customer guarantees that can be forced under the ACL ( Australian
Consumer Law ). So also legal influence.
McD’s warranties: provide replacement or full refund after faults or mistakes made in
the order.

operations strategies
● performance objectives – quality, speed, dependability, flexibility,
customisation, cost

Signposts or benchmarks, used to evaluate performance, relating to particular

aspects of the transformation process, how effective operations is to contributing to
profit maximisation.
Short term goals for operations influenced by the production process
Data to use for their evaluation
- Quality; design = product design functionality, durability / conformance = focus
on how well it meets standards / service = reliability appropriation and
responsiveness Customer satisfaction ( w/ Satisfaction index ), average out
taste, price and service
- Speed; time taken- wait times ( customer wait to fulfil a demand ), lead times (
produce and distribute ), processing times ( produce product only ) Lead
times, wait times and processing times
- Cost; minimisation of COGS and expenses within the operations process to
achieve cost leadership Average customer spend on counter/ kiosk/ app (
only use one ), CoGS, Expenses
- Customisation; individualised products to customer specific needs Ratio of
orders customised/ ability to
- Flexibility; reaction to market changes - external influences Additional time
experienced in peak times
- Dependability; consistency and reliability Returns and Incorrect orders

Objective McDonald’s Specific Strategies

Quality Higher quality inputs, Monitor for freshness/ stock rotation, update
machinery, streamline production, Customer Satisfaction index

Cost Martin Brower decrease production and transport costs,

casualisation of workforce to reduce wages and salaries + tech

Speed Process layout, automation, reducing lead, wait and processing

times, assembly process improvements.

Dependability Reduce faults in production of inputs, defective, uncooked or

damaged, incorrect errors → checks e.g. 52 checks on burgers

Customisation Give customers the option to customise their orders. 1:25

Flexibility Reduce the variation between peak and off-peak times, worker
levels.

● new product or service design and development

Refers to the steps undertaken by a business to create, design and develop new
goods and services. Focuses on satisfying the needs of existing customers + selling
to new customers.
This is important to maintain market share ( to keep demand stable over time ) and
provide a competitive advantage. However, it’s expensive and a time consuming
process involving market research, concept development and testing + risk of
failure.
- Push factors ( forced ) : Competition, changes in consumer demand, changes
in tastes and preferences
- Pull factors ( internal choice ) : Innovation, quality assurance and TQM, cost
leadership, differentiation & competitive advantage
- Engage in this due to either market research evaluation or technological
advancements

Factors considered: Market demand, quality, design and features, cost of the
product, brand suitability, infrastructure and machinery requirements, utility/ value

Design - relates to new products, Development - relates to implementing

ideas and innovations and testing ideas

Comes before development Checking copyright

Conducting SWOT analysis Producing prototypes

Identifying opportunities/ market gaps Checking target market reaction to both

product/ price

Screening ideas with customers Changes/ trial runs

Basic costing and pricing Overall feasibility

Process always starts with market research to determine demand/ viability, then to
product design and prototype testing e.g. market testing, refinement and then launch
in operations.

- Service design- based upon customer desire/ wants and then for the business
it must be cost effective + long term e.g. explicit * tangible aspects implicit
*intangible
- Product mix: range of products offered by a business
- New products influence operations management as they take of time, money
and effort but can lead to a vital competitive advantage; change sourcing,
production methods and technology/ expertise needed as well as store layout

Context, Food, McDonald’s - finding opportunities and problems to solve:

McSpicy - People wanting more flavour, migrant taste palettes, something new
different

● supply chain management – logistics, e-commerce, global sourcing

Involves the integrating and managing of the flow of supplies throughout inputs,
TP and outputs to best meet customer needs.
- Influenced by what is sold + returned, logistics and distribution ( not just
sourcing )
- Systems approach - starting with the final product + working backwards to go
through all production processes + create strategies

Sourcing: the purchasing of inputs for the TP - from a range of suppliers. To

determine sources:
- Assess consumer demand ( volume )
- Determine quality of inputs + match with business quality levels
- Flexibility of the supplier
- Cost compared with costs of other suppliers + affordability

McD outsources SCM through a logistics service provider - Martin Brower to reduce
costs, consistency etc.

Global sourcing - purchasing supplies/ services without location constraints to better

meet business needs. However, challenges include:

- Cost advantages - Relocation

- Access to new technologies - Cost + complexity of logistics,
- Expertise, cheaper labour storage, distribution
- Operate longer hours - Managing international
regulations, exchange rates,
cultural/ language, trust issues

E-commerce - buying and selling of goods via the internet

- For the business: E-procurement ( suppliers can see business’s supply
levels ), direct access + timely delivery
- For the consumer: online transactions - increased diversity of ordering
options ( more management requirements ), manage for stock in-person +
online
- Automated stock ordering

Logistics: Distribution of products/ services from a producer to a consumer including

transportation, storage and materials.
- Various ‘routes’ e.g. producer - wholesaler - retailer - consumer

Transportation - Physical movement of inventories

Storage, warehousing and distribution centres: finding a secure and sizeable place
to hold stock until required
- LT/ ST, preservation characteristics e.g. fridges, necessary if there are many
outlets → efficient storage + associate costs
14.4 million kilometres travelled by Martin Brower’s vehicles

Warehousing involves using a facility for storage, protection + distribution of

stock. Costs include premises itself, insurance, movement, carrying excess +
redundant stock ( loss of profit ), theft, damaged goods - lowered through waste
management + inventory management.

Distribution centres minimise the time to take stock to outlets – requiring

managers to balance cost/ w/ time saved - worth it?? + co-located with transport
hubs.

Materials, handling and packaging: Standards and methods applied during the
movement and storage of goods:
- Some products require specific care, skills, dangerous or may pose hazards
- Government regulations regarding storing ‘dangerous’ goods, meet a certain
standard for quality

● outsourcing – advantages and disadvantages

The use of external providers to perform non-central business activities in a

specialised manner ( low cost + effective ) & business focus resources on their own
core activities.
Types: 1. fee for service ( contracted for an agreed price ), 2. onshore ( domestic ),
3. offshore ( foreign ).
Common activities: manufacturing, distribution + logistics, employee training/
recruitment, accounting, marketing, administration, IT, legal process outsourcing (
LPO )
McD outsources majority of the production of inputs: ARYTZA for bread, OSI for
meat = centralize operations on in-store processes.

- Efficiency + save costs in labour, - Initial high payback

training etc. - Loss of control, security
- Share risks - Decreased business knowledge
- Simplied TP - Decreased flexibility/
- Access to professional services dependability ( slowed times? )
→ better TP/ quality - Communication, time zone + trust
- Concentrate on core functions barriers if offshore

● technology – leading edge, established

Implementation of technology/ change use of technology to improve operations

processes ( both in TP & management/ admin ) . E.g CAD/ CAM, Robotics, E-
business.
Leading edge technology - Most advanced or innovative at a point in time for a
specific industry. E.g. self-serve kiosks, robotics Self-serve kiosks - increase volume
of sales, decrease queuing times.

Established - technology that has been developed and widely used and accepted/
expected in an industry e.g. conveyer belts for manufacturing.

Overall technology benefits:

- Efficiency + cost - maximised output → economies of scale, process capacity
- Basically all objectives
- Reduce expensive wage costs
However, technology is initially expensive to implement & requires repairs, T+D
costs to use, risky if untested, lost personal element

● inventory management – advantages and disadvantages of holding stock,

LIFO (last-in-first-out), FIFO (first-in-first-out), JIT (just-in-time)

Amount of stock or both raw materials, work-in-progress and finished goods hence
it’s the systematic approach to receiving, storing and selling.
- Stock must be managed to maximise value → effect on revenue and profit
- Stock is a very important current asset needed for cash regularly
Good IM → reduce costs, optimization, customer satisfaction

Just-In-Time - holding minimal stock and relying on prompt deliveries of stock as it

is needed: a technique to increase effiiciency and decrease waste, costs

Holding - Meets demands - Storage charges,

Stock - Economies of scale with bulk spoilage, insurance,
orders theft + handling
- Stock is planned + ordered at expenses
regular intervals – maintained - May become obsolete (
cash flow + WC ( working especially perishables )
capital ) – loss of value + proft
- Reduced lead times - Capital tied up in stock -
- Distribution centres cant be used elsewhere

Just-In- - Lower inventory holding costs - Problems with order

Time ( insurance, warehousing rent, fulfillment
guards ) - Little room for error (
- Improved cash flow - more forecast demands
free cash accurately )
- Less dead stock - profitability - Price shocks on inputs (
no choice but to buy it )

LIFO Overstate cost and less profit -

avoid tax
 FIFO Seems like more profit

McD receives delivers from Martin Brower up to 3 times a week - replenish stocks +
ensure freshness of perishablles ( JIT strategy )

● quality management –

Processes that a business undertakes to ensure consistency, reliability, safety and

fitness of purpose of product - promotes greater efficiency and customer satisfaction

- control
A reactive approach involving inspections at various points to check for problems
and defects. Total 52 checks on burger patties,

- assurance
A proactive approach using a system to ensure set standards are achieved such as
high quality materials, planning, designing. ISO 9000 Global quality standards.
Gain customer satisfaction, loyalty etc. Supplier Quality Management System (
SQMS ) → assure input quality meet ISO 17020 standards - ensure consistently safe
food = adhere to laws and regulations.

- improvement
Continuous improvement is an ongoing commitment to improving business goods
and services over time by sourcing higher quality inputs, technology and staff
training. ( Everyone in the business working together ). Fast food industry doesn’t
lend itself to TQM

TQM - business wide commitment to deliver quality to customers ( All KBF’s )

● overcoming resistance to change – financial costs, purchasing new

equipment, redundancy payments, retraining, reorganising plant layout, inertia

Change is inevitable and caused by changes in the internal and external

environment. ( internal - decisions e.g. approach/ innovation vs external = economic,
gov policies ).

This can be foreseen by ( monitoring and controlling )

- SWOT Analysis
- Information systems/ collection of data e.g. trackers
- Data Analysis

2 Main reasons for resistance are: Financial reasons ( cost ), psychological/

emotional → this must be managed!!

Any activity/ change has a COST ( businesses do not have surplus cash ) including:
Purchasing new equipment - Machinery and technology used in the TP and has a
capital cost. Yet in the long term they will contribute lower per unit costs, speed,
differentiation, reduce waste etc.

Redundancy is the loss of employment due to skills not required and involves a
redundancy payout - a very expensive compensation for being made redundant
dependent on pay level, time etc.
Necessary to restructure and replace people w/ automation.

Retraining - another large cost + compliance costs but is NECESSARY for the job to
be successful.

Inertia is a psychological resistance to change:

- Uncertainty of ‘what’s next’
- Uncomfortable changes to work patterns
- Result in high staff turnover if not managed → creating more costs.

STRATEGIES? Proactive and reactive management.

- Investigate the cause for resistance
- Initiate clear and effective communication
- Create a culture of change ( internal and external )
- Positive leadership e.g. open mindedness, confidence
- Management consultants - experts can bring expertise but also costly
- Ignore negative reactions? employ others.

● global factors – global sourcing, economies of scale, scanning and learning,

research and development

Global sourcing - purchasing supplies/ services without location constraints to better

meet business needs.

- Cost advantages - Relocation

- Access to new technologies - Cost + complexity of logistics,
- Expertise, cheaper labour storage, distribution
- Operate longer hours - Managing international
regulations, exchange rates,
cultural/ language, trust issues

Economies of Scale - Cost advantages gained by producing on a larger scale. How?

- Lower their per unit costs ( efficient use of resources )
- Expanding to global markets ( more customers )

McDonald’s does this in nearly all areas of its business where production volumes
are high to keep costs low.

Scanning and learning - looking at other business’ practice + adopting ideas ( gain a
diversity of experience → informed decision making towards operations objectives )
- E.g. being aware of new demands, supplies, manufacturing processes,
 competitors and global policies overseas

New products: copied KFC’s famous popcorn chicken with ‘chicken bites’, implement
emerging technology - cookers, toasters, KVS

Research & Development - Innovative companies spend time and money on R&D to
create leading edge technology + create innovative products and solutions
- Ascertaining customer needs
- Always both internal and external factors ( e.g. innovation vs legal factors )

Established R&D Centre to assess external factors → e.g. as a Sensory Science

Team to assess smell + if they meet trends ( development ).

FINANCE

role of financial management

● strategic role of financial management

Long term goals of: profit maximisation, wealth creation and financial stability
through the management of financial resources ( money ).
- This is achieved through planning, monitoring and control of resources such
as debt and equity ( such as through financial statements to analyse position,
budgets to control funds = long term goals )
- Effective sourcing and allocation
Short term objectives: Liquidity, profitability, efficiency, growth and solvency.

Contribution of this then goes towards all the other KBF’s of operations, marketing,
finance etc.
Commented [1]: add mc donalds long term goals here
Profit max - by Increasing sales revenue and reduce costs
Wealth creation ( net worth ) - Purchasing another licence
Financial stability - Increasing equity, reduce LT debt and retain levels of cash assets

Proof of success: experience business success being a flagship franchise and

among the most successful in NSW

● objectives of financial management

- profitability, growth, efficiency, liquidity, solvency

For all case study references, include that it’s over the 2022-23 financial year:
McDonald’s objectives

Liquidity The time to convert current Improve working captial Commented [2]: these ratios are their goals not their
assets into cash to pay short current
 term debts. If they have sufficient TARGET
on hand assets to meet 200% ( 2:1 on liquidity ratio )
commitments. Current 2.2 : 1

Profitability The ability of a business to earn Increase gross & net profit
a profit. Achieved by minimising
costs/ expenses and increasing 65% Gross Profit
sales. 15% Net Profit
Profit in the long term is 40% Return on OE
important to pay drawings and
dividends. Current, 50%

Efficiency 1/ How a business controls Reduce operating,

expenses for profit administrative and selling
2/ How efficiently it collects debt expenses
and manages cash flow
Maximum profits with lowest 45% Efficiency ratio
asset use 5 DAYS Accounts Receivable
Turnover ratio

Growth Financial growth is achieved by Increase core sales

increasing total sales and profit to
then increase the value of assets. Increase cash reserves to Commented [3]: how will they increase cash reserves?
Can be both physical expansion purchase additional licence ( Commented [4]: profitability management primarily, to
and market share. E.g utilising plan to open a new store/ increase net profit and hence retained profits. also
economies of scale another franchise ) working capital because if cash is more effectively used
there will be more leftover!

Increase market share by 2%

Solvency Extent of a business’ ability to Improve the funding structure to

meet long-term financial reduce gearing/ reduce risk
commitments, dependent on how
reliant they are on external debt. Improve gearing ratio to 300%

- short-term and long-term

Short term - operational ( daily/ weekly ), tactical 1-2 years E.g. increase profits by
50%

Long term - strategic ( over 5 years ) E.g. hire more salespeople, replace equipment,
adopt new technology and programs

Complementary - the pursuit of maximising profitability will also assist growth ( as

they profits can be channelled back )

Conflict - The focus on growth e.g. expansion incurs costs/ causing a deterioration
of expense efficiency
E.g. With sale and lease back, it turns from a NCA to an expense and hence reduces
business profitability and company tax is paid on profitability CONFLICT OF
LIQUIDITY AND PROF

● interdependence with other key business functions

Interdependence Operations McDonald’s Commented [5]: do we have to talk abt MCD

interdependene

Operations Supports T.P & Sourcing ??Operations in the Commented [6]: Yes
reliance and allocating capital to restaurants is reliant on a Commented [7]: oh what, so is it everything but
stock purchase, D+E, consistent and reliable supply strategies for Mc donalds
machinery, space, R+D of inputs from Martin Brower. Commented [8]: idk, in the year 10 stuff there is
Ordering is automated and the interdependence on maccas so it could be, ill ask in my
average store in Sydney interview
receives 2.3 deliveries per Commented [9]: mr mann said it would be good to
week. Accounts with Martin know
Brower need to be paid so that Commented [10]: do we have to talk abt MCD
inventory isn’t delayed due to interdependene
non-payment. Finance is also
responsible for sourcing
funding to upgrade kitchen
machinery.

Operations benefit LPEGS similarity, profit The finance KBF cannot Commented [11]: Yes
maximisation through comp. support operations without Commented [12]: oh what, so is it everything but
Adv, financial stability and financial capital. Operations strategies for Mc donalds
generation of sales plays a crucial role in Commented [13]: idk, in the year 10 stuff there is
producing high quality, cost interdependence on maccas so it could be, ill ask in my
effective goods that customers interview
demand and purchase. This Commented [14]: mr mann said it would be good to
contributes to increased know
revenue inflows which crucial
to effective financial
management.

Marketing reliance Meets design brief - sell

potential, unique features (
BEST possible ) + product
costs influence pricing

Marketing benefit Discovers what is in

demand, tailor processes
and packaging determined
then produced by op.

Human Resources Determines job description

 reliance and specifications, nature of
the work and quality
objective

Human Resources Provide skilled and

benefits experienced workers to
operate PP. Proper training/
up productivity organisation

influences on financial management

● internal sources of finance – retained profits

A form of equity finance or ‘Owner’s Equity’, and is funds generated from within the
business e.g. net profit.

Net profit - Dividend = Retained Profit final sum of money left over

The most common source, majority of the businesses in Australia keep some profit
in retained earnings as it is cheaper and easier. Profit and be retained for financial
expansion instead of all being distributed to owner’s, benefit future plans for other
KBF’s.

McD relies upon retained earnings to accumulate the $2.5 million needed for a new Commented [15]: fill
restaurant opening. 5% of their gross profit goes to royalties and they pay
comfortably with high high profitability.

● external sources of finance

- debt – short-term borrowing (overdraft, commercial bills, factoring),

long-term borrowing (mortgage, debentures, unsecured notes, leasing)

Debt -
Short-term borrowing or Current Liabilities <12 months

Overdraft Allows a business to draw on Purchase of stock/

more funds than available in a expenses payment e.g.
cheque account up to a bills
negotiated amount.
Higher Interest, admin
fees & charges

Commercial bills Banks issued short term loans Bulk purchases of stock
that allow use of >$100,000 to be over 100,000 if known to
repaid with interest in a no. of be repaid easily
days.
Interest

Factoring Credit sales - products are given Use the recovered cash
and paid at a date in the future for stock, expenses or
debt repayments- quick
When the business sells its fix
debtors to a debt collector or
factor to purchase them at a Fee & charges
discount. Discount on debt

McD has an overdraft from NAB ( bank ) of $250,000 ( A LOT - WCM )

Commercial bill $400,000, ST loan $95,000

Long-term borrowing or Non-current Liabilities >12 months

Mortgage A legal agreement where a band Purchase of land,

lends money at interest in buildings.
exchange for property ( usually
over 30-40 years ) Interest, admin fees &
charges

Leasing Allows the lessee to utilise assets Interest.

for a set amount of time on
property or vehicles.

Debentures Debt securities by public Purchase of NC assets,

companies, allowing borrowing of technology and expansion
large sums of money in exchange
for guaranteed repayment Interest/ returns.
according to a schedule/ rate.
Secured against company assets.

Unsecured notes Offer a higher rate of return/ Purchase of NC assets,

 interest than debentures and tech and expansion.
aren’t secured by company
assets. Less security, buyers take
a risk. High interest/
returns.

Recent refurbishment that was financed by a term loan $1.5 million over 10 years
from McDonalds Australia

$5 million Chattel mortgage, McD Aus takes on the mortgage which the licensee
must start making repayments once they start trading. Has a variable interest rate
which has currently dropped to 3.5% pa over 30 years, significantly lowering debt
obligations ( risk and stress - more money to retain )

Equipment from McD Aus partner ‘Cookquip’, leased quarterly with a payment of
$18,900

- equity – ordinary shares (new issues, rights issues, placements, share

purchase plans), private equity

Equity -

Float Shares Refer to types below –

( Public companies only )

Private Equity
( Private companies )

Types of shares:
- Ordinary Shares: commonly traded shares in which investors get dividends
- New Issues: shares for the first time, new portions of the business sold off (
loss of ownership and effect on solvency )
- Rights issue: privilege granted to shareholders to buy new shares same
comp
- Placements: allotment of shares directly to investors + discounted
- Share Purchase Plans: offer to existing shareholders to buy more without
brokerage fees + no prospectus

● financial institutions – banks, investment banks, finance companies,

superannuation funds, life insurance companies, unit trusts and the Australian
Securities Exchange

Institutions provide debt finance and set interest rates ( cost of borrowing ), lend
loans and other financial services for business planning.
Banks: a financial institution licensed to receive deposits and make loans
> Influence by determining loans given majority of debt finance

If a licence requires a loan from an external lender, they must choose and negotiate
a loan with NAB ( National Australia Bank ) e.g. overdraft of $250,000

Investment banks: Helps businesses raise capital + provide consultancy services

> Influence by assisting firms raise finance ( lend or issue of shares ), advice on
business expansion

Finance Companies: specialise in small levels of finance ( loans for cash flow ),
specifics for businesses e.g. factoring
> Same as banks but smaller scale

Superannuation: Deposits of savings made by individuals and firms for retirement

> Percentage of employee salary lost & as a firm they can invest in shares

As a large employer, MH makes mandatory superannuation contributions on behalf

of employees totalling $159,960 per quarter - huge contribution to expenses.

Life Insurance companies

> Provide financial protection for employees

Unit Trusts: Funds from many small investors turned into an asset e.g. shares
> May purchase shares = equity up and finance raise for activities

Australian Securities Exchange ( ASX - Stock ): An exchange medium for securities

or stock, offers listings/ trading and provides info and services.
> Primary ( create securities ) and secondary market ( traded ) for companies, also
trades debt or equity securities

McD’s Bank is NAB for their overdraft. If they increase interest rates, expenses
interest goes up or overdraft ( income statement ) and net profits go down. They’ve
got the same amount of debt bet it get’s more expensive.

Hence, in terms of objectives - expense efficiency goes up ( BAD ) and profitability

goes down.

- Mention what ratios will be impacted e.g Expenses ratio!

- Relate to different balance sheets. Interest rates don’t go straight on the
balance sheet, but goes on the Revenue and Cash flow statements.
- Also relate it to RIPS

● influence of government – Reserve Bank & interest rates, Australian

Securities and Investments Commission, company taxation

Australia’s central bank, conducts monetary policy + maintain a strong financial

system + economic prosperity
>The RBA set the cash rate which changes the borrowing rates for banks, which
gets passed to borrowers

Monthly cash rate decisions affect interest rates on all purchases, e.g recent low rate
environment in Australia means a 0.7% increase on the MH’s Chattel mortgage,
reducing debt obligations. ( Prof improves, expense efficiency goes up )

Efficiency - control of expenses for profit

Interest Rates
> They are an expense ( income statement ) and affect the NPR ( profitability ) and it
itself is measured by the expense efficiency ratio. Also paid monthly in the cash flow
statement affecting stability + risky.
Low interest payments = good

Recent low rate environment in Australia means a 0.7% increase on the MH’s
Chattel mortgage, reducing debt obligations. ( Prof improves, expense efficiency
goes up )

ASIC is an independent body which is a financial regulator

> Regulate investments, insurance, super, banking, ensure accurate and ethical
statements, investigate frauds + have power to fine

Influence on MH’s processes, obligation to submit audited financial statements

quarterly to MA under the Corporations Act 2001. Audit’s are external checks that
the business meets minimum standards of accuracy, transparency etc.

$2025 of compliance costs paid to MA to carry out financial services. ( EXPENSE )

Meanwhile the ATO ( company tax = 30% for large business ) and RBA ( set
interest rates ). This tax is paid on profitability.

MH must record all business activities/ transactions to the Australian Tax Office, as
each licensee is considered a ‘small business’, the franchise MA must pay 27.5% of
income tax on its NP. This is paid directly by licensees to the ATO. Takes away
$384,954 from Net Profit! And the NP ratio is calculated After Tax!!

This one is tricky to explain so try to avoid it.

E.g. With sale and lease back, it turns from a NCA to an expense and hence reduces
business profitability and company tax is paid on profitability

● global market influences – economic outlook, availability of funds, interest

rates

Global economic outlook refers to the projected changes to the level of economic
growth throughout the world. ‘Consumer confidence’
Currently growth has lost momentum and inflation has become widespread. (
Because of this the cost of borrowing has come down to subside this ).
- Global demand has experienced a decrease- sales have come down during
COVID years
- Manufacturing inflation

Determining if the economy is overall good or bad will impact:

- Demand for their products
- Volume and prices of inputs
- Whether interest rates are likely to increase or decrease
- Financial risk and liquidity levels
- Investment in technology/ expansion

EXPANSION in GDP = economic growth, increase sales revenue, increase

profitability

CONTRACTION in GDP = less economic growth, lower sales and low profit, affect
unemployment

Availability of Funds - ease to access funds both in debt and equity

- Institutions, companies, governments or individuals who may lend money or
raise capital
- Conditions and rates apply based on risk, demand and supply and domestic
economic outlook

COVID-19 significantly reduced availability of affordable funds hence MH temporarily

received funds from McD USA

Interest rates are the cost of borrowing money ( other countries too ), higher risk =
higher rates. They represent an additional EXPENSE for businesses.

Australian interest rates are traditionally higher so might be outsourced to get lower
rates BUT deal with rules and regulations, influences/ impacts and exchange rates.

McD US is expecting interest expenses to increase by 2% - reducing net profit,

efficiency of sales + liquidity ( due to more outflows )

2019 Essay question: Explain the influence of global markets on financial

management of business ( 20 Marks )

processes of financial management

● planning and implementing – financial needs, budgets, record systems,

financial risks, financial controls FBRRC

Most common causes of problems: theft, fraud, damage or loss of assets or

errors in record systems. This is why we need the the financial planning cycle
Determine financial needs - Obtained from financial statements, also determined
by size, business cycle, plans, equity etc. Forecasts and situational analysis
SWOT ( found in business plan )
- Special case for new businesses = start up costs/ surplus of funds to avoid
liquidity issues
McD’s start up costs has been determined as $2.5 million to purchase a licence,
store and a surplus for starting up

Develop budgets - provide quantitative information measuring planned vs actual

performance.
- Cash required for planned outlays ( purchases )
- Cost of capital expenditure against earning capacity
- Estimated use of cost of inputs and inventory
- Number of and cost of labour hours required for production.

Maintain record systems - Mechanisms to record data for accounts receivable,

wages, taxes etc. + Need to:
- Accurate, reliable, efficient, accessible ( ethical )
- Annual report to the ATO and ASIC
- Kept by law
- Confidentiality
- Prevent fraud + theft

Identify financial risks -

Unable to cover financial commitments

- Borrowing too much ( high gearing )
- Fluctuating interest rates
- Liquidity
- Profitability ( minimise risk )
- Other risks

Establish financial controls -

Policies and procedures = efficient achievement of plans

Policy examples:
- Clear authorisation for tasks
- Controlling cash e.g. registers, banked daily, automation
- Protecting assets ( inventory protection )
- Credit procedures ( chasing up those acc rec! )
= FINANCIAL STABILITY

– debt and equity financing & advantages and disadvantages of each

Debt -

+ Readily available + quickly - Risk due to interest, charges (

acquired that fluctuate too ), bankruptcy

+ More profitable - Security needed

+ Flexible payment periods + types - Regular payments

+ No dilution of ownership - Overall very expensive

Equity -

+ Cheaper ( no interest ) - Lower profits and return for

owner

+ Retain control on capital use - Long expensive process

+ Low gearing - Ownership is diluted

+ Less risk - ROI expectation ( return on

investment )

– matching the terms and source of finance to business purpose

Must be suitable for the purpose for which the funds are required. Match the length
or term of the loan with the economic lifetime of the asset. E.g CL fund CA. NCL to
buy NCA.

Examples of question + answer:

Purchase of stock is always overdraft

● monitoring and controlling

– cash flow statement, income statement, balance sheet

Cash flow statement:

Inflows and Outflows
- Are they in debt?

Income or revenue statement:

- Sales - COGS = GP - Expenses = NP
- Profitability ratios
- Part of accounts receivable turnover ratio
- Expense ratio ( so both efficiencies )

Balance sheet
- Solvency and liquidity ratios
- Business worth, stability

Make sure to use these to recommend strategies!

● financial ratios

Refer to the financial ratios as a SICJ in your essays, comparing both historical and
industry ratios. Refer to the use of them as a strategy and in various other questions
as well!!

– liquidity – current ratio (current assets ÷ current liabilities)

Shows ability and financial position to meet short-term financial commitments,

Insufficient funds? No difficulties paying off liabilities? Asset rich and cash poor?
Risk of cash shortfalls?
ideal of 2:1 = sound, source from balance sheet only.
2022 = 2.2: 1
2019 = 1.89 : 1
Industry = 1.67 : 1

– gearing – debt to equity ratio (total liabilities ÷ total equity)

Shows the extent of reliance on external loans versus equity to finance the business/
mix of debt and equity, highly geared = indicates business risk but also greater
potential for growth as debt is more profitable Can deter potential investors! ( relate
to the benefits of debt + equity ), acceptance level 0.5-0.7 : 1. Commented [16]: IT WAS LITERALLY IN MY NOTES
2022 = 3 : 1 HOW DID I GET THIS WRONG ARE YOU KIDDING
ME
2019 = 3.2 : 1
Industry = 3.7 : 1

– profitability – gross profit ratio (gross profit ÷ sales); net profit ratio
(net profit ÷ sales); return on equity ratio (net profit ÷ total equity)

GP: Leftover when removing the production and distribution costs of goods from
sales made, Income statement “How much every dollar in sales results in GP” GP is
important for
2022 = 70.4%
2019 = 66%
Industry = 55%

NP: Higher the better, average is NP/ Sales. Determines money leftover to distribute
dividends, other expenses and undertake business initiatives such as _____. 10 -
18% is acceptable, above is high below is low
2022 = 17.6%
2019 = 15%
Industry = 12%

Return on Equity: ( profitability for investors specific ) Net profit/ Total Equity
Determines if the business is providing an effective return to its owner's
investment. This requires both the revenue and balance sheet. Above 18% is high,
less than 11% is low
2022 = 43.8%
2021 = 39%
Industry = 37%

‘This means that for every $1 contributed in owner’s equity, 60 cents is generated in
net profit’

– efficiency – expense ratio (total expenses ÷ sales), accounts

receivable turnover ratio (sales ÷ accounts receivable)

Review:
1. How a business controls expenses for profit
2. How efficiently it collects debt and manages cash flow
Also involves maximising sales, minimising expenses.

Expense ratio: Expenses/ Sales, lower = more efficient LOWEST POSSIBLE

GPR-NPR

The expense ratio is always the difference between the gross profit and net profit
ratio. Efficiency isn’t based on how many sales but how they’re used!
2022 = 43%
2019 = 48%
Industry = 58%

Accounts Receivable Turnover: Sales / Accounts Receivable = x. 365/ x = days

2022 = 4 days
2021 = 7 days
Industry = 15 days

– comparative ratio analysis – over different time periods, against

standards, with similar businesses

Uses of comparative ratio analysis: for anyone looking to buy a business + compare
to other similar businesses.
Questions are commonly in the form of multiple choice questions.

● limitations of financial reports – normalised earnings, capitalising expenses,

valuing assets, timing issues, debt repayments, notes to the financial
statements

Normalised earnings - earnings adjusted to account for changes in the economic

cycle or to spread out one-off unusual purchases that will affect profitability.

Capitalising expenses - an expense is listed on the balance sheet as an asset

rather than an expense on the income statement e.g. R&D as an asset overstating
profits and understating expenses.

Valuing assets - hard to estimate the value of intangibles such as goodwill or

intellectual property/ patents and record them on the balance sheet. Also an issue
with appreciation or depreciation of assets such as large vehicles.

Timing issues - When revenues and expenses are recorded, should be for the
period in which they generate revenue instead of split up.

Debt repayments - Financial reports don’t have the capacity to disclose specific
information about debt repayments such as interest, due dates and length.

Notes to the financial statement - useful to report the details and additional
information left out of the main reporting documents e.g. fine print stating the
depreciation of assets.

● ethical issues related to financial reports

Financial managers and accountants have an ethical and legal obligation to ensure
financial records are accurate, creative accounting to provide favoured data should
be avoided.

Audited accounts:

An audit is an independent check of accuracy or records/ procedures. CONTROL (

of planning and controlling ).

Internal Audits Completed by company’s financial Low cost

managers Less potential for leaks (
of confidential info )
Possibility for
manipulation

Management Result due to other projects Assessing financial

audits needed to be funded position before big
projects
Also internal
Not broad enough to
 uncover other issues
( Also internal )

External Audits Corporations Act 2001 - Transparency, efficiency

investigated by independent and to accounting and protect
McDonalds must specialised auditor. Why? potential investors
do this. Guarantee a minimum standard of ( trust! )
accuracy Done to a min standard

Record Keeping

All transactions should be recorded ( e.g. Cash flow statement ). This is avoided
by paying cash, but lowering expenditure records = lower tax = if caught = large
fines. E.g company tax is calculated as say 30% on net profit

Reporting Practices

Reports need to be easy to analyse and understand.

Free OF “creative” measures to : ( relates to financial report limitations )

- Over or understate profits
- Over or understate returns to shareholders
- Over or understate value of assets or net worth
- Hide failed initiatives by absorbing costs into other business areas
- Hide information by not providing notes

AES 200 + 300 accounting standards = minimum guideline.

financial management strategies

● cash flow management

Cash flow is the money flowing in and out of a business ( inflows and outflows )

Cash flow management aims to organise timing of inflows and outflows, and
cash flow strategies are needed when outflows are larger than inflows.

Effective cash flow management involves:

- Monitoring a cash flow statement to track the movement of cash into and out
of the business
- Strategies to increase/ speed up inflow, decrease/ slow down outflow
Managers need to look at the patterns of inflows ( season sales peaks ) and
outflows ( payment to suppliers ) and ensure that sufficient cash is available.

– cash flow statements

Analysing cash flow statements make inferences about their LPEGS.

CASH IS CRITICAL- if expenses are all due at the SAME TIME = cash shortage

– distribution of payments, discounts for early payments, factoring

3 main cash flow strategies:

- Distribution of payments: business can spread out/ stagger their payments to
reduce impact ( e.g. monthly vs annually ).
- Offer debtors ( acc r. ) a discount for paying early, to improve liquidity, or also
pay your own accounts payable early
- Factoring - quickly increase cash levels but last resort, reduces profitability (
don't collect the full amount

McD
Pays Chattel mortgage and leasing on a quarterly basis to reduce impact
Increase in cash inflows during december quarter + holiday season, but low cash
inflow + hence a relative cash shortage in the september quarter

MH offers a 10% discount on upfront payments or a 5% discount within 3 business

days, other hand Martin Brower ( distributor ) offers a 5% discount on certain stock if
paid within 10 days

● working capital management

Involves finding the best mix of current assets and current liabilities needed to
achieve the objectives of the business. Ties into the current ratio! Not high or low.

Unlike cash flow which is about CA for repaying CL, this is about having CA for
funding.

E.g. Accounts receivable - paid on time, Overdraft - has an interest rate

WC = CA - CL Working capital = describe the funds available for the short-term

financial commitments of a business. CR = CA/CL

Net working capital funds needed for day-to-day operations of a business to produce
profits.

Potential issues:
- Cash not sufficient → ( overlap to cash flow management )
- Substantial overdraft → interest!
- High accounts receivable → takes time to collect ‘theoretical money’
- Significant loans → repayments, worsen liquidity + solvency

Efficient and organised use of working capital > effective and profitable

Causes cash shortages, liquidity problems + find new finance/ sell off NCA ( can
cause business failure ).
 – control of current assets – cash, receivables, inventories

Cash Resources for day-to- Too much and Sale and lease, Lease
day for stock, loans, little Cash budgets (
wages estimate )

Stock/ Goods, materials + Slow to turnover Stocktakes ( against

Inventories merchandise kept for or holding too records ), security
sale or distribution much or too little JIT + Sales
I MNGMT

Accounts Money owed to a Too long, poor Discounts if early +

Receivable business by its debtors ( policy + record/ penalties if late (
credit sales ) management tighten policy ) ,
promote cash or
factoring
Customer history

Improved retention of cash past 4 years ( never too little )

30 day credit policy - not overkept

Receives 3 deliveries a week from Martin Brower, JIT strategy to maintain high
turnover into cash
Cost Guarantee - commitment towards 2% reductions in input costs per annum (
negotiation )

– control of current liabilities – payables, loans, overdrafts

Accounts Money owed BY Stock withheld until Take advantage of

Payable the business to paid, poor discounts offered for
others usually relationships early payment
suppliers

Overdraft An extension of Large + frequent Prevent cash shortages

funds on a use ( means bank through monitoring, use
cheque account, balance is other forms of finance
repaid with constantly below 0 ) e.g. retained earnings
interest

Loan Sums borrowed High interest Monitor interest rates +

from the bank charges and high fees
debt levels too Different sourcing/ diff
financial institution (
LINK to e.g investment
banks), maintain
positive relationship
MH can use loans as McD Aus has very low interest rates + favourable terms in
comparison to other lenders in the market.

Martin Brower discount for paying Accounts payabl earlier? - take advantage of that
– ‘more’ strategies – leasing, sale and lease back

Leasing: A contract to borrow assets such as property for a period of time in return
for periodic payments.
+ Boosts working capital = cash, doesn’t come up on balance sheet, avoid large
outlays avoids depreciation and tax deductible
- Adds to expenses

Leasing from McD Aus has very low interest rates, less of an impact on expenses
compared to other lenders in the market.

Sale and Lease back: A transaction in which an owner sells an asset to unlock
capital and leases it or similar asset back instead ( usually for fixed assets ).
+ Unlocks capital ( cash )
+ Transforms NCA to CA
+ Same benefits as leasing
- Adds to expenses, have to comply to lessee conditions

Factoring - Selling accounts receivable at a discount to a factor

+ Injection of cash ( cash flow ), accounts receivable turnover ratio, less stress
- Decreases profitability

● profitability management

Profitability management involves minimising expenses while maximising sales

revenue

Refer to all 3 profitability ratios, gross profit, net profit, return on equity

– cost controls – fixed and variable, cost centres, expense minimisation

Variable Costs - Inputs, Wages ( Easier Fixed Costs - Hard to change

to change )

Inputs: Supplier negotiation for Monitor interest repayments, fees,

discounts/ cheaper suppliers, JIT government charges, licensing and try
Wages: Outsource intermediate and negotiate/ bargain
products, self service and automation

The franchise McD Aus has a ‘Cost Guarantee’ with Martin Brower involving a
commitment to achieve 2% reductions in input costs per annum in return for McD
Aus to increase sales volume by 3%. Through negotiations with suppliers, MH has
low input costs and an initiative to increase sales which both contribute to profit
maximisation.
Cost centres - Targeting a specific business department ( choose one from the
revenue statement e.g. R&D, accounting, HR = anything that only indirectly
contributes ) and establish budgets to reduce expenses . BE SPECIFIC to
maximise net profit ratio

Undertaking expense minimisation ( base this on expenses list )

- Source cheaper utilities
- Implement tech to reduce energy consumption - McD utilities experienced an
8% increase in the last 3 years!
- Effective rostering/ Wages
- Limit overuse of debt - 3:1 solvency = large interest expenses
- Avoid fees/ pay creditors etc.

Success: By further casualising the workforce and the use of self-serve kiosks, MH
has reduced ‘wages and salaries’ expenses by 3% which also has a knock on effect
on their largest expense, superannuation.
– revenue controls – marketing objectives

To do with sales!
- Increase market share ( pricing strategies increase or loss leader etc. )
- Expand product mix ( customisation )
- Maximise customer service - Mcdelivery on the mymaccas app MH has
experiences a 25% increase in revenue

● global financial management Commented [17]: do all the gfm practice questions
sometime soon
Global economy has provided opportunities, however gfm must deal with the
unpredictable nature of economic variables and behaviours of participants in
other markets, which can create inherent risk.

Sources of risk
- Changes in interest rates
- Failure to receive payment from international transactions
- Failure to receive goods from international transactions
- The risks that occur due to derivatives transactions
- Internal actions or failures of the organisation, particular people, processes
and systems

Risk management: refers to business’s managers attempting to ensure that

unforeseen events have little impact ( minimise impact ) - proactive.

– exchange rates

Ratio of one currency to another e.g AUD : USD, 1 to 1 currencies are at parody.

When the Australian dollar appreciates it is worth more when converted to other
currencies e.g ( 1.5 : 1 ).
 -Imports cheaper -Reduced international competitiveness
-Cheaper to expand into global markets ( exports are expensive to purchase for
-Attract foreign investors foreigners ) Commented [18]: what does this mean?
-Lower profit returns on overseas
activities

Dollar depreciates e.g ( 0.5 : 1 )

-Improved competitiveness ( cheaper for -Expensive to import ^ costs

foreign buyers to purchase ) -Hard to expand into global markets
-Increased profit returns -Discourage investors

Exchange rate fluctuations impact a businesses profits and cash flow. E.g. debt.
Other problems include:
- Sales revenue - competitiveness
- Production costs ( outflows ) - cost of importing raw materials/ outsourcing
- Loans overseas - debt may suddenly become more expensive ( high gearing )
- Any transfers of money ( revenue kept in foreign currency ) will lower profits
when converted to AUD

– interest rates

Interest rates are the price of borrowed funds = additional expense. They are a risk
due to unpredictability.
- We are currently in a period of rising interest rates which means any highly
geared business will experience risk + discourage further loans/ growth
objective

– methods of international payment – payment in advance, letter of

credit, clean payment, bill of exchange

There are two perspectives to take into account

- Seller Perspective ( business )
- Buyers perspective ( customer/ overseas )
- Take into account the inherent lack of trust and uncertainty.
- Banks are an intermediary

Risks for the business involve trust and reputation regarding the customer and legal
system differences.

Risks for the customer involve quality, payment and timing of arrival for goods being
imported.

From lowest ( no trust ) risk to highest risk ( needs trust ) for the exporter >

Payment in Buyer makes an upfront payment Secure for sellers but not
 Advance before goods are shipped. attractive for customers that may
not be satisfied. Suitable for new
customers.

Letter of Document issued by the bank Both parties have some

Credit that guarantees payment to the assurance. Buyer initiates this
seller once conditions are met process + the bank is an
e.g provement the goods have intermediary.
shipped ( bill of lading )

Bill of Document produced by exporter Widely used as an exporter still

Exchange demanding payment at specified retains control over goods until
time. 1 - Against payment: guaranteed payment.
customers can collect goods
after paying from their bank 2 -
Against acceptance: collect
before paying + importer must
sign the bill. Commented [19]: which is better?

Clean Goods are dispatched with an Increased risk for the exporter.
Payment expectation that the buyer will No accompanying documents +
pay in the future. required trust + an established
relationship + simple
transactions only.

– hedging

Hedging ( is any strategy that ) attempts to minimise risk from exchange rates ( like
derivatives ) through 2 methods.

Natural Hedging - Exploitation of normal operating procedures e.g. revenue +

expenses = same currency. To do with business structure.
- Offshore subsidiaries - another company mostly owned by the bigger firm
- If inflows and outflows are in the same currency they will offset each other if
the exchange rate fluctuates!!
- Pricing strategies ( marketing ) - reduce sensitivity e.g. ____ Commented [20]: ask how these work
- Everything in AUD ( gives buyer all the risk ) Commented [21]: and the one below

– derivatives

Derivatives reduce the impact of exchange rates. This is the second strategy of
hedging. Businesses enter into contracts to buy/sell at an agreed rate rather than
the risky spot rate.

Spot rate - Market exchange rate at the time of transaction.

Forward Exchange Contract - Specified rate on a given day in the future ( fixed ).
Options contract - The ‘right’ ( not an obligation ) to buy/ sell currency at agreed
price when the market is undesirable. More expensive but more flexible/ choice.

Swap contract agreement - Agreements to swap currency + reverse in the future (

same exchange regardless of market rate ).

All of these financial devices represent a cost.

MARKETING

role of marketing
● strategic role of marketing goods and services

Marketing is the process of planning, pricing, promotion and distribution of

products to current and potential customers. This leads to the achievement of
organisational objectives and the overarching goal of profit maximisation through
increasing sales revenue.

Role of marketing is to inform, remind and persuade, maintaining a business to

customer relationship that then supports profit maximisation.

Marketing Objectives:

Sales Increasing the income from sales to

Revenue then maximise profit by attracting new
customers and enticing existing
customers towards repeat purchases.

Brand Extent to which consumers are familiar

Awareness with the qualities/ image of a brand of
goods/ services. ( Recognisable? )

Market The portion of a market controlled by a McDonald’s selling a wider

Share particular company or product. ( variety of products enticing
Through strong customer relationships customers that would
) usually purchase
Increasing sales as a percentage of elsewhere.
potential customers.

Social, Organisation behaviour that shows

Ethical and responsibility for the impacts of their
Environme decisions on individuals, society and
ntal the environment by being transparent +
Accountabi ethical. E.g. packaging or ethical
lity advertisements

Legal Meet and exceed legal requirements in

Accountabi regard to marketing tactics used to
 lity and persuade customers to purchase. E.g
Complianc ACCC - deceptive and misleading
e advertisements, Consumer and
Competition Act 2010 ( sell what you
say )

Purpose of setting objectives? Focus for decision making, improve coordination (

planning, monitoring and controlling )

● interdependence with other key business functions

Interdependence is the mutual dependence necessary to achieve goals.

M + Operations - M finds what is in demand to then feed into the TP as

an input to better achieve a competitive product.
Determine design and packaging needs/
customisation objective DIFFERENTIATE
- O is responsible for meeting the design brief and
hence increasing sales

M + Finance - Sales generates revenue contributing to profit

maximisation. Inform, remind and persuade = source
of equity finance - stability
-

M + HR -

● production, selling, marketing approaches

Marketing approaches have shifted overtime due to the business environment and
consumer behaviour.

Production - ( 1820’s - 1920’s ) Maximising TP efficiency, lowering production costs -

simple consumer goods e.g. Tissues

Selling - ( 1920’s - 1960’s ) Aggressive sales techniques to convince + sell as much

as possible e.g Car dealership

Marketing - ( 1960’s onwards ) understanding and meeting the needs of customers,

promoting to resonate w/ customers, targeted campaigns. e.g. Apple technology
- Eventually branched to CSR, Customer Orientation, Relationship marketing
 ● types of markets – resource, industrial, intermediate, consumer, mass, niche

Resource Primary Production, raw materials e.g. Factors of production are

Mining, agriculture, forestry and fishing. extracted, grown and
Wheat farmer harvested - sold to firms

Industrial Secondary, goods and services that go Manufactures e.g. a

into production of OTHER products. bakery, cars or curators of
information e.g.
Aryzta bakery accounting services

Intermediate Retailers who purchase finished Fruit and veg markets,

products and resell to other businesses leasing companies,
Martin Brower supermarkets?

Consumer Goods at their final point of Fast food stores

consumption McDonald’s
Mass: appealing to the majority Vegan meat products
Niche: micro-market, specialised Beyond Meat

influences on marketing

● factors influencing customer choice – psychological, sociocultural, economic,

government

Understanding customer choice → modifying strategies to appeal to their motives.

Psycholo Internal influences/ Perception, motive, attitude,

gical intrinsic factors of a personality and learning.
product affecting
buying behaviour.

Sociocult External forces SES status = prestigious

ural exerted by other products, culture, family and
people and groups role, peer group through
that influence word-of-mouth.
perception/ choice.

Economic Impact a customer’s Boom - increased

willingness and ability economic activity, inflation
to spend. and sales/ Recession -
price conscious customers,
existing market share, value
products

Governm Direct and indirect Direct - healthy eating

 ent government influence. campaigns
Economic policy → Indirect - interest rates, tax
affect on economic CCA 2010 covered.
activity.

● consumer laws

All laws are implemented through the Competition and Consumer Act 2010 by the
ACCC. Involves automatic consumer guarantees/ rights if goods and services
purchased don't comply with the ACL ( Australian Consumer Law ).

ACL - ‘acceptable quality’ - implemented by the CCA 2010

CCA 2010
1. To protect consumers against undesirable practices
2. To regulate certain trade practices restricting fair competition

– deceptive and misleading advertising

Marketing practices designed to deceive consumers to gain an unfair advantage

over competitors:
- Before and after images, fine print, special offers ( available continuously ),
packaging, country of origin, false statistics, bait and switch

– price discrimination

Charging different prices for the same product or service to different customers (
favoured treatment to some ).
- Only exception – proven supply cost difference e.g. overseas or payment
method

– implied conditions

Unspoken and unwritten terms of a contract that ensures customers are receiving
goods of ‘acceptable quality’ and ‘fit for purpose’.

– warranties

A promise to repair or replace products if:

- It is faulty, does not match the advertised description, fails to do the job
- Exceptions: customer changes their mind, cheaper product elsewhere,
misuse and damage post-purchase

● ethical – truth, accuracy and good taste in advertising, products that may
damage health, engaging in fair competition, sugging

Ethics refers to society’s expectations of what is right/ wrong + behaving in a morally

acceptable manner – marketing often uses questionable tactics, often subjective.
Consumers have more influence than before + society’s awareness of ethical issues
has increased. Homogenous products are very competitive → need for questionable
marketing.
- Critics involve promoting materialism, stereotypes, product placement and
invasion of privacy

Advertising – messages communicated through a mass medium.

Truth, accuracy and good Exaggerated claims vs just

taste in advertising persuasive, concealed facts, vague
statements.
Good taste - highly subjective +
influenced by society e.g changing
family roles
Ads to children - easily influenced,
skewed reality + health importance

Products that may Raised concerns of medical

damage health professionals.
Marketing may - conceal health
issues, promote regardless of
concerns. Instead it should inform
us.

Engaging in fair ACCC aims to stop anti-competitive

competition behaviour. E.g. agreements,
minimum resale prices, misuse of
market power, unfair pricing

Sugging - selling under Using ‘market research’ to push

the guise of research products, collecting customer data
to sell certain products.

marketing processes
● situational analysis – SWOT, product life cycle

SWOT Analysis:

Planning and analysis tool. Evaluate internal strengths and weaknesses and
opportunities and threats from the external environment. Clear indicator of business
position compared to competitors.
- Use it to develop strategies, take advantage of opps, proactive improvements
+ react to threats.

McDonald’s SWOT Analysis

Strengths Weaknesses
 - Good reputation with customers
and suppliers
- Established

Opportunities Threats
- Competitors
-

Product Life Cycle:

Consists of stages a product passes through:

- Introduction: increase customer awareness, low sales
- Growth: brand awareness and market share, sales increase
- Maturity: sales plateau - market saturated ( peak sales )
- Decline: Sales go down, price lowered ( extension or renewal? of product )

Purpose? Forecast sales trends, target market + position, management and changes
of product range, focus on certain products etc.
- Extension strategies to improve sales - advertising, price reduction, add
value, new market + packaging

● market research

Market research is the systematic collecting, recording and analysing of

information concerning a specific market plan ( about market + buyer’s behaviour ).
Used to understand the target market + better appeal to customers w/ strategies
+ improve sales > prof max.

1. Determine information needs

 2. Collecting data from sources - telephone, personal surveys, online + observe

3. Analysing data - facts alone don’t help > interpreted

Primary data = facts and figures from original sources that fit the purpose of
research
- Survey - asking + interviewing, personal, groups, electronic, questionnaires
- Observation
- Experiment method

Secondary data = previously collected by another person or organisation - collected

for another purpose e.g. census
- Internal ( within ) or external ( ABS )

● establishing marketing objectives

Specific, realistic and measurable goals achieved through the marketing plan.
Common objectives:

- Increasing market share

Business’s shares for a particular product, by increasing sales as a percentage of
potential customers.

- Expanding product mix

Range of products offered ( width ), number of products within a range, no. of
product ranges.
Mixes must change along with the competitive environment, preferences, influences
etc.

- Maximising customer service

Responding to the needs and problems of customers, results in improved
satisfaction/ positive connotation - profit max.
Achieve this through staff training, anticipate trends + market orientated approach.

McD - Relocated staff to table service, numbers on tables, app + home delivery,
natural customer interactions

( also consider role objectives )

● identifying target markets

Primary Market - most marketing resources, Secondary - less important market

segment.

Identifying a target market is important to understand the needs of customers,

develop relevant and relatable promotions and utilise their resources effectively.

Total/ Mass marketing:

- Mass production, distribution, uniform promotion
 - Products appeal to all consumers/ ignore segments
- Optimize sales/ cheaper to produce
- All customers have similar needs and wants
- Economies of scale

Market Segmentation:
- Total market is segmented then the business chooses one part
- Common characteristics

Niche Market Advantages

- Micro market
- Less competitiveness, can specialise, staff + prices easy to set up
- Very small potential customer base, high risk
- Easier to reach with marketing strategies

● developing marketing strategies

Marketing strategies are the use of the marketing mix or 7P’s to achieve objectives
determined by factors such as product life cycle.

● implementation, monitoring and controlling – developing a financial forecast;

comparing actual and planned results, revising the marketing strategy

Implementation - process of putting the marketing strategies from the plan ( how,
where, when ) into operation. + financial forecast

Monitoring - checking and observing the actual progress of the plan / look into
problems or opportunities - comparing actual vs planned results

Controlling - comparison of planned performance against actual performance +

taking corrective action

Establish KPIs:
1. Sales Analysis: actual with forecast sales ( inexpensive but no indication of
profits )
2. Market share Analysis
3. Marketing Profitability Analysis - comparing costs of various marketing
activities/ ROI ( return on investment ).

- Compare data e.g. budgets, costs

Revisiting the strategy - modifications on 4P’s or new introductions/ deletions in

product range.

marketing strategies

Key to every possible strategy:

- Segmentation, physical differentiation, image positioning
- Branding ( tangible and/ or intangible ), labelling
 ● market segmentation, product/ service differentiation and positioning

Dividing prospective customers into segments with common characteristics and

hence have similar buying behaviour.

McD targets various different segments of customers from families with children -
happy meal, on-the-go breakfast for tradies etc.

‘Segment variable’ - characteristic used to divide.

Geographic Demographic Psychographic Behavioural

Based on defined Based on personal According to Actual customer

geographical attributes lifestyles behaviour towards
boundaries p/s

Region, country, Age, gender, Lifestyle, User status, usage

population, climate income – others, personality, values, rates or brand
ethnicity, SES ( interests loyalty
easy to do )

Value foods - Big mac, fries, Premium angus McCafe’s

frozen coke, hash meals beef, salads
brown

Students, tradies, Low-moderate Middle-high Workers, road trip

low income SES/ income income + health commuters, older
conscious people

Product/ service differentiation ( tangible ) - developing and promoting differences in

a good or service, different from competitors ( increase sales revenue )
- Packaging or labelling ( small ) OR good customer service/ convenience/
intangible aspects ( complex )

Usually cost related, actual or perceived quality, convenience or CSR/

environmental + social features, image, service etc.

A physical difference - toys in McDonald’s happy meals → actual quality

Cost leadership → 1$ frozen coke or ice cream

Product/ service positioning ( intangible )- differentiate the perception or IMAGE of a

product/ service in relation to competitors/ market in which it competes ( increase
market share )

Seven strategies - product attributes, benefits, usage occasions, users ( identification

), against a competitor, away from competitors, product classes.
??

● products – goods and/ or services

Tangible - Physical
Intangible - Services, activities/ intangible elements of a tangible product

Total product concept: Both tangible and intangible components

– branding

Branding is a combination of name, term, symbol, design that identifies and

distinguishes a product from competitors. Helps customer decision-making on
quality, values etc. + level of psychological reward once purchased?

Benefits - attracts customers for a business, for customers helps identification +

creates interest, defends against competition etc.

Brand names - spoken name, protected by trademarks

Symbols and logos - a graphical representation that identifies a business or product

Colour choices can evoke certain emotions.

– packaging

Packaging has various uses to preserve, protect, attract attention, provide

information, transport/ storage, sustainability? It can influence a customer's
perception of a product.

Labelling - presents information. Must comply with legislation e.g providing nutrition
information or the country of origin. ( ACCC )

● price including pricing methods – cost, market, competition-based

Price refers to the amount of money a customer is prepared to offer or pay in

exchange for a product.
- Too high: lost sales, perceived benefits < costs
- Too low: perception of inferiority quality
Price can outweigh all other factors - important for decision-making.

Below are broad ‘approaches’

Cost-based pricing - derived from the cost of production & adding a mark-up.
- Difficult to determine markup, don’t take into account market mix + external
factors

Market-based pricing - according to supply and demand & market expectations,

accommodates in/ off periods
Competition-based pricing - price covers business costs + comparable to
competitors price.
- Used in highly competitive markets, undercutting = breakthrough, price leader

– pricing strategies – skimming, penetration, loss leaders, price points

Skimming Setting a high price for Useful to pay off Cutting edge
new product - maximise research and technology
profits from ‘early development costs,
adopters’, then gradually risky if competitors
reduced offer the same +
lower price

Penetration Low price for new Attract customers + Companies

products to quickly market share. entering a
establish a market then May not have crowded market,
gradually increased. enough profit to pay little brand
off costs recognition

Loss Lower than it’s cost to Attracts market McDonalds -

leader attract customers + share, May not frozen coke
increase sales across have enough profit
product range - entice to pay off costs
customers

Price Specific points to appeal Cost of different

points to different market Apple models, 12,
segments, address 12 Pro, 12 Pro
different value Max
perceptions

Prestige High price to portray a

Pricing ‘feeling’ of high quality Pay off production
and distinction costs but may
backfire

– price and quality interaction

Higher price means better quality and affects customer perception of a brands value,
reliability and psychological reward when purchased. This can be manipulated -
some prestige prices being of the same quality.

● promotion
The methods used to inform, remind and persuade target customers to purchase
products - influence decision making. This helps attract new customers, a way of
providing information, repeat purchases, brand loyalty ( alignment with objectives ).

– elements of the promotion mix – advertising, personal selling and

relationship marketing, sales promotions, publicity and public relations

Advertising Paid, non-personal message Mass such as TV, direct

communication through a mass through leaflets,
medium telemarketing, e-
marketing, social media
or billboards

Personal Sales representatives activities direct Usually expensive,

selling to customers with the ability to modify complex + highly
perception to each individual individual products. Help
find right products, long-
term relationship

( linked ^) Create customer loyalty by meeting Loyalty programs are

Relationship individual needs of customers + make rewards-based offers for
marketing them come back through customer frequent purchases.
care, service + loyalty programs Psychological + spending
habits.

Sales Direct inducement to customers to sell Limited time offers, free

promotion more - entice new customers + repeat gifts, samples, point of
purchases, encourage a trial purchase, giveaways,
purchase – increase effectiveness of deals
others e.g. advertising

Publicity + 1) Any free news story about a

public business ( uncontrolled ) - enhance
relations the image, raise awareness
2) Promoting a positive
2) Activities aimed at creating and image, effective message
maintaining favourable relations comms, monitor issues,
between a business customers crisis management

– the communication process – opinion leaders, word of mouth

Opinion leaders can draw the attention of customers ( famous people ) using ‘ethos’.
Word-of-mouth - sharing personal experience and recommendations is valuable.
Social media - increasingly popular

● place/distribution
Place or distribution involves the activities required to make the product available to
customers when and where they want to purchase them ( once manufactured ).
- Interdependence with operations

– distribution channels

The routes taken to get the product from the business to the customer. Involves
intermediaries → wholesalers, brokers, agents or retailers some which are ‘invisible’.

1. Producer to consumer
2. Producer to retailer to consumer ( large bulky goods - hard to store in
workshops )
3. Producer to wholesaler to retailer to consumer ( smaller consumer goods )
4. Producer to agent to wholesaler to retailer to consumer ( without their own
sales representative - need help )

Other innovation - e-commerce, mobiles e.g. MyMaccas App

Average customer spend at customer service stations is $10 whereas for MyMacca's
online app it’s $18.

– channel choice – intensive, selective, exclusive

Channel of distribution depends on the location of the business market, product and:
Market coverage: Number of outlets a firm chooses - intensivity levels…

Intensive Saturate the market ( convenience goods )

Selective Moderate proportion to possible outlets ( usually appliances ) -

link to retail outlet + brand, customer seeks out specific outlet

Exclusive Only one retail outlet - usually exclusive + expensive

– physical distribution issues – transport, warehousing, inventory

Activities concerned with the efficient movement of products from producer to the
consumer.

Transport: a network of transportation with the main methods being rail, road, sea
and air. Meet customers who need to deliver products + good order.

Warehousing: Receiving, storing and dispatching goods - central organisation to be

efficiently distributed at a later time. E.g. shelving system, inventory control

Inventory: important to how much is stock is being kept ( not too much or less )

Poor distribution effects - e.g. in periods of high demand the products run out
upsetting customers etc.
 ● people, processes and physical evidence

People: The interaction between the customer and employees delivering the
service. Anyone in contact with customers will make an impression and influence
perception.

Training in customer service, knowledge of product attributes, post-sales service

→
repeat sales, reputation, word-of-mouth communication + differentiation

Natural dialogue with customers - whole crew support network

Processes: systems of delivering products + services to the customer, behaviour of
those who deliver.
- A good process ensures - reliability of delivery, save time and money by
efficiency
- Include mandatory procedures for start and end staff, clothing and customer
service KPI’s
- Wait times, helpfulness, accommodate customer requests
Important for customer retention, reputation, convenience, comp advantage,
reliability strategies response to influences

Syllabus points Case Study

Supply Chain

Inventory Management JIT

Quality Management Control - Check pattie temperature

Assurance - Vegetables treated with
pesticides

Customers who have a positive experience → repeat customers/ no complaints →

market share.

McDonald’s objectives to lower wait times to under 3 minutes, efficient delivery, self-
serve kiosk option, friendly team.

Physical evidence:

Everything customers SEE when interacting with your business

- Physical environment, layout and interior design, branding, staff clothing + act
- Strategies to reduce perceived risk: see examples, testimonials, clean tidy,
guaranteed satisfaction stats
Important for impression, satisfaction, reputation, repeat sales, word-of-mouth
Modern and comfortable decor, clean, playground for family vibes, McCafe - see
goods.

● e-marketing

Electronic marketing is the practice of using the internet for marketing. Important
because Australia is the 3rd largest online consuming nation.

Social Media Advertising – facebook, youtube ads use the algorithm to show specific
ads to likely + segmented customers.

● global marketing

– global branding

Global branding - the worldwide use of a name, term, symbol, or logo to identify a
business e.g. Maccas Arches known worldwide

– standardisation

A global marketing approach that assumes the way the product is used and the
needs it satisfies are uniform all around the world. Identical for domestic + global:
saves costs, easy management, streamlined. Reduce costs, consistent branding
benefits!
- BUT doesn’t cater for different marketing needs/ wants, outdated ‘production’
marketing approach.
1.7 million a day in AUS, 70 million worldwide → must be very dependable, some
standardised products across the globe e.g. normal fries.

– customisation

Businesses can customise their marketing plan to the specific economic and
sociocultural characteristics of different target countries’ markets. Consumer
acceptance.

– global pricing

How businesses coordinate their pricing policies across different countries.

– competitive positioning

Differentiation of products against international competitors.

HUMAN RESOURCES

role of human resource management

● strategic role of human resource management Commented [22]: for another day: add mcdonalds stuff
especially indicators !
Managing the formal relationships between employees and employers.

However, there is an inherent tension in this created by differing agendas from each
party in the relationship.

Employee’s Agenda Employer’s Agenda

- Maximum pay ( remuneration ) - Best possible job

for as little work as possible - Pay as little as possible
- Best work conditions - Output!!
- Enjoyable/ fulfilling - T+D workers so they stay loyal
- Trained and developed and decrease turnover
- Clear career path devops

AIM of HRM: To develop a committed, motivated and productive individual that

enjoys the challenges they face by their work. ( Maximise achievement of the 4
objectives ).

McD HRM Aims: People-centricity, Individual learning, Organisational learning,

Diversity + inclusion.

Maximising Improving the capacity of human

Productivity capital to produce output →
increased capacity at lower cost

Minimising Reducing the costs associated with

Costs human capital especially wages &
salaries, additionals, T+D through
negotiation and casualisation

Ethical and Acting in an acceptable manner +

Social over and above legal e.g. awards,
responsibility work conditions, career
development, human connection

Legal Conducting HR processes +

Compliance strategies to meet and exceed legal
requirements under the Fairwork
Act, WH&S
GOOD HRM: Staff as an asset more than a cost, award rates, comms and
participation, engagement, safe environment, good corporate culture, T+D, paths,
job security etc. So that both the employee and employers benefit ( from LT
productivity etc. )

● Interdependence with other key business functions

O O determines staffing needs HR provides skilled +

+ design, their day-to-day experienced workers to
tasks, ops profits go into execute TP ( through
wages + salary processes ) - maximise
productivity

F F is important for budgeting HR maximises

and and allocating sufficient productivity of human
funding to HR processes + capital to increase quality
business most important + efficiency, lower wage
resource costs ( employees are an
asset + big expense )

M Brand awareness to attract Skilled + creative

successful + high quality workers for marketing
workers, advertise jobs, campaigns ( or outsource
profit maximisation ), sales people to
represent + human
element

● outsourcing
– humans resource functions

The use of a third-party business ( contracting or subtracting ) aiming to:

- Obtain superior service, focus on core, lower costs

Employee - involves a contract that involves ‘exclusivity’ ( no two places at once )

BUT a contractor isn’t bound e.g. employment agencies, IT consultancy, marketing
firms etc.

Franchisees can sub-contract accountants and lawyer services, maintenance and fit
out of the kitchen, refurbishments

Contracts provide external services ( individual or a business ) for non central

functions under certain terms and conditions to ensure an achieved benefit.

– using contractors – domestic, global

Domestic subcontracting allows firms to source people physically but remain

employed by the company loaning or contracting them ( local/ interstate/ global )
Global subcontracting sourcing of functions overseas ( due to competition and tech
) usually labour, specialised services, technology and infrastructure or skills/
equipment not usually available.
- Risks: loss of control + security, gaps if unfulfilled, language, staff and
customer resistance, reduced quality

- Focus on core - Contract renewal costs

- Access to external skills/ service - Employee troubles
- Reduce costs - Company problems
- Improve quality - Loss of control
- Reduce time - Best fit
- Contracts = fix costs for a bit? Commented [23]: meaning?

effectiveness of human resource management

● indicators

HR managers use indicators to measure performance and evaluate the effectiveness

of the business/ team/ individual.

– corporate culture

Values, ideas, expectations and beliefs shared by members of the business –

contribute to overall culture.

If poor: high turnover, poor customer service, high absenteeism, accidents, disputes
+ internal conflict → reflected in low sales, low profits

If high: quality relationships, higher pay, fun, collaboration, transparency + trust,

T+D, flexibility, family, creative perks etc, ‘force for good’

Ray Kroc ( founder ): ‘None of us is as good as all of us’ → aims of people centricity,
learning, diversity + inclusion

– benchmarking key variables

Process in which indicators compare between businesses or divisions to determine

strengths and weaknesses ( 4 types )
- Quantitative: labour budgets, sickness time, appraisas, turnover
- Qualitative: reasons for turnover ( boredom ), dispute arguments

1. Informal: Networking and conversations with colleagues

2. Best Practice: Compare with the ‘best’ practice/ researched literature ( ideal )
3. Performance: Levels of activity with previous or other
4. Balance Scorecard: Activities against pre-estabilished objectives

HR Audit: Outside consultants to systematically analyse HR activities effectiveness

 – changes in staff turnover

Separation of employees from an employer both voluntary and involuntarily –

measured as a % of total staff ( caused by dissatisfaction and is costly ).
- Costs involved with turnover: exit interviews, admin, productivity decrease,
new recruitment and training → EXPENSIVE

– absenteeism

Average rate of employee absenteeism - neglect to turn up when scheduled ( sick

days may be used to show dissatisfaction ). It is also costly as work isn’t done +
requires employment of casuals.

– accidents

Rate of accidents if ineffective HR - costly, lost productivity + unethical, due to too

hard work, unrealistic deadlines promoting shortcuts, unhappy and hence
carelessness, untrained.

Workers Compensation: An insurance payment to employees if they are injured at

work/ become sick due to work: cover their wages, medical expenses, rehabilitation (
costly + compulsory )
- Direct costs: insurance itself + lost productivity
- Indirect: Wage + time lost, contamination, wastage, repairs, fines for
negligence, low morale, perception, operations delays ( lower productivity )

– levels of disputation

Level, seriousness and frequency of disputes indicate efficiency of HR management

+ happiness levels of a workforce.

Types Overt Covert

Employees Pickets, strikes, boycotts, stop Absenteeism, turnover, low

meetings productivity, low co-op

Employers / Lockouts, standowns, Discrimination, harassment, low

Management dismissals, retrenchments co-op, exclusion from decision-
making

– worker satisfaction

Extent to which employees are happy + motivated including the attitudes,

commitment and efforts in performing tasks. Dissatisfaction destroys cooperation
and reduces quality and service goals.

How to answer an Assess and Indicator question> ??

1. Make a judgement
 2. Choose ONE indicator + explain what it is
3. Impacts e.g. up productivity and low costs
4. Importance?

key influences

● stakeholders

Stakeholders are parties that have a vested interest to see the HR function perform
efficiently and fairly.

– employers, employees

Employer → hiring + raising employee Employee → Seek fair wages,

productivity, low labour costs conditions + future opportunities

Exercises control over employees Understand they are under

Responsibility of payment control
Provide a safe working environment Care for own health and safety
Holds the right to dismiss employees Complete tasks satisfactorily
Manage conflict
Provide job training specifics

– employer associations, unions

Employer Associations - Organisations responsible for promoting the interests of

employers within the business environment.

Often are in pay negotiations and disputes with unions.

Trade unions - Association of workers that aims to advance the interests of
members by improving working conditions. ( negotiate on behalf of employees )
- E.g. Retail and Fast Food Workers Union
- However, their influence has declined due to more individual wage
determination ( not standardised ) etc.

– government organisations

Highly influential as it provides the overarching legal framework acting as an

employer, economic manager, policy manager and international representative.
– society

Indirectly involved as HR practices reflect the perspective + norms of society e.g.

politicians.

● legal – the current legal framework

MNCA: Collective or individual bargaining w/o tribunals ( government action )

- e.g Mediation or Negotiation
- If these do not work = Fair Work Australia e.g. Conciliation and Arbitration
-
– the employment contract

A legally binding, formal agreement between the employer and employee.

- Either indefinite or fixed term
- Governed by common law, awards and agreements

– common law ( rights and obligations of employers and employees )

Law developed by courts and tribunals based on precedent ( previous cases/ aka
judge decision making ).

Allows basic rights and obligations of employers and employees - reflected to each
other… This includes the 11 minimum employment standards.

– minimum employment standards minimum wage rates, awards,

enterprise agreements, other employment contracts

11 National Employment Standards - must be provided by employers, safety net

for ALL employees + basis for modern awards etc.
1. 38 hours maximum hours of weekly work
2. Request for flexible working conditions
3. Parental leave and related entitlements ( up to 12 months )
4. Annual leave ( 4 weeks paid )
5. Personal/ carer’s leave + compassionate ( grief ) leave
6. Community service leave ( e.g. jury duty )
7. Long service leave
8. Public holidays
9. 4wks Notice of termination + up to 16 wks redundancy pay
 10. Provision of a Fair Work Information Statement
11. Offers and requests to convert from casual → permanent

Minimum Wage Rates - From July 2023 Increase $23.23 hour/ $882.80 per week

Minimum Obligations ( under common law )

Employers Employees

Providing Work Carry out duties in a way that is beneficial to the

business, taking care + safely

Payment of Income + Expenses Follow procedures + policies

Termination Notice Termination notice

Awards - Legally enforceable minimum terms that apply to a specific business or

industry. Currently 122 modern awards to cover different groups of employees with
‘Individual Flexibility Agreements - used to change/ personalise standards’

Enterprise Agreements - made at a workplace collectively with an employer +

group of employees. Alternative to a modern award + must be approved by FWC (
pass BOOT - ensures each employee is Better Off Overall Test ).
- 3 types - single-enterprise, multi-enterprise, greenfield ( new business )

Other - Individual common law contracts: when an employer and an individual

employee negotiate pay + conditions ( private + non-union enterprises ).
- Minimums still apply

– work health and safety and workers compensation

Work Health and Safety Act 2011 NSW - requires employers to eliminate risk + avoid
employee injury overall

Compensation - a range of benefits to employees suffering from a work related

injury or disease ( Applies to their families too ) administered by WorkCover NSW.
E.g. finance for lost wages, medical expenses and rehabilitation

– anti discrimination and equal employment opportunity

Anti-discrimination: E.g. Sex Discrimination Act 1984 protects employees from direct
and indirect discrimination within HR processes E.g. Fair Work Act 2009 - unfair
dismissal protection.

Equal employment opportunity - equitable policies for recruitment/ selection/

promotion etc. – e.g. all businesses with over 100 employees must develop an
Affirmative Action Program
 ● economic

Economic changes and growth e.g. expansions and contracts can influence HR
processes e.g. staff separation.

Economic contraction → Lowered consumption of G/S → Lowered sales revenue

→ Lower demand for labour → Increased separation of staff!! ( redundancies )

Reverse this for economic expansion!

● technological

Technology is the major source of improvements in productivity, communication and

competition → competitive advantage. Creates new jobs + causes redundancies.

+ Improved communication - virtual - Requires specialised training +

work, teams calls, work from development to use
home - Job descriptions for ppl who can
+ Improved flexibility use tech
+ Allows for outsourcing/ offshore - Employees always on call
+ Improved productivity - Work life balance ( Min 38 hrs
+ Lower LT costs increased )
+ Streamlined recruitment - Redundancies
- High ST Cost

● social – changing work patterns, living standards

Must adapt to changing social trends in Australian society - provide ‘quality’ jobs.

Changing work patterns

- Increase in part-time and casual work
- Career flexibility + job mobility - more change
- Increased participation rates of women - juggling family commitments
- Ageing Workforce: comes with ageing population, fill skill shortages
- Early retirement - less difficult age, casual work
- Living Standards - work life balance promotion

● ethics and corporate social responsibility

Responsible businesses HR must understand values systems to determine right +

wrong, be honourable and fair.

Establish a code of conduct: A statement of acceptable and unacceptable

behaviours in a business.

Code of ethics: statement of a business’ values and principles expected to

reciprocate by staff.

Examples of CSR in HRM

- Encourage staff participation that give back to the community
 - Discourage extra hours + spend time with family
- Increasing the use of teleconferencing rather than on-site meetings
- Promote healthy living and eating e.g meals, gym memberships

- Discrimination, bullying, unlawful - Pleasant work, support,

dismissal, unethical work motivated and valued staff,
conditions, injuries, stress improved performance,
compliance

Responsible Student Employment Policy - young full time students don’t work more
than 2 shifts per week.

processes of human resource management

● acquisition

Identifying staffing needs

HR Manager goal: best HR inputs → goals and objectives

Consider internal environment ( business goals ) & external environment ( economic

etc. ) to figure out best HR inputs → goals and objectives

Result:
- Job analysis: determining the exact nature of the position needing to be
filled: maximise efficiency
- Job description: written statement highlighting these specific duties and
tasks
- Job specification: another written statement regarding qualifications, skills and
experience required for the position

Recruitment

The process of locating and attracting the right quantity and quality of staff to
apply for employment vacancies at the right cost

Internal: Promotion of people within the business ( loyalty, motivation )

External: Attracting suitable applicants from outside ( new talent, new skills )

Placement

Allocating employees in a position that best utilises the skills of the individual to
meet the needs of the business.

Acquisition processes must:

- Hire motivated applicants whose values align with business culture
- Fair, non-discriminatory, legally compliant
- Communicate job description/ specification well in advance/ clearly
 - USE STRATEGIES for selection aligned with business NEEDS

● development

Development processes ensure that experienced and talented employees are

retained through sustained motivation + LT promotion opportunities.

Training: Process of teaching staff how to perform their job more efficiently and
effectively by boosting their knowledge and skills

Formal off-the-job:
- Barista Academy - McCafe
- Universities, specific courses
- Facilitated by institutions or organisations
On the job:
- Informal, while they are working
Other experienced employees

Development: Refers to activities that prepare staff to take greater future

responsibility – enhancing skills in line with business growth

Development steps:
- Induction - introduction to culture
- Training
- Organisational development - retainment strategies

Reduction in hierarchical business structures → employee decision-making + less

promotional opportunities → STRATEGIES include:
- Job enlargement ( more tasks ), job rotation, job enrichment ( more
responsibilities ), job sharing ( achievable + allow leave ), mentoring roles to
other staff!

- Mentoring + Coaching - further motivation: A strategy to motivate employees

with leadership potential as they provide advice to newer employees

- Performance appraisal - a systematic process of evaluating an employer’s

performance ( strengths, weaknesses, opportunities for development )
against a set criteria IN ORDER TO provide feedback, justify promotion,
monitor performance against KPIs - circles back to identifying NEEDS

Importance? Promotion opportunities, job satisfaction, interest and motivation,

adaptability, future employability + adapt to influences e.g. technology!

● maintenance

The processes needed to retain staff and manage their wellbeing, safety and
health at work as well as effective communication and legal compliance.

Communication and workplace culture

Regular team meetings, bulletins and newspapers, social functions, feedback
pathways → build trust, comfort and recognition within a workplace setting

Employee participation

Maximise wellbeing through employee decision making - sense of involvement,

inclusion and satisfaction. E.g. through collective bargaining, activities

Benefits ( Monetary + non-monetary )

Employers are legally required to pay superannuation for 18+ yrs per month ( for all
employee types ).

Other benefits include working arrangements, training opportunities, gym

membership, car, housing, electronics, travel allowances etc.

Monetary: financial compensation e.g. increase pay rates/ bonuses

Non-monetary: conditions as rewards

Flexible and family-friendly work arrangements

Increased popularity of a work life balance → flexible working arrangements e.g.

work from home days reflected in the Employment Standards.

E.g. flexible working hours, job sharing ( allow one person to go on leave while the
other works ), work-from-home arrangements, family leave options ( not covered by
11 min standards )

Legal compliance and corporate social responsibility

HR procedures must comply with legislation e.g. anti discrimination, sex

discrimination, WHS taxation etc.

Primary cause - bullying:

- Provide information on workplace bullying
- Training for awareness
- Promote respectful culture
- Grievance procedures

● separation

When an employee leaves a business/ the end of an employee contract and can be
either voluntary or involuntary.

Voluntary Involuntary - must be legal !!

Resignation Redundancy - job no longer exists due

 to technological/ restructure or
acquisition ( also can be voluntary )

Retirement Retrenchment - business dismisses an

employee/ not enough work

Relocation Dismissal - instant, for serious

misconduct e.g. theft ( reason must be
determined by Fair Work Commision if
reasonable )

Employers need to prove that they have provided a warning over time, given
support and advice, notices of termination and response opportunities etc. before
dismissing an employee.

Redundancies - must be able to prove they were no longer needed, no other work
was there and they looked for reemployment for them

Unfair dismissal remedy applications are provided by the Fair Work Commission if
they are unable to prove these requirements.

strategies of human resource management

● leadership style

Refers to the way managers communicate with their employees to inspire and
motivate them to work together to achieve an organisation’s goal

Style Autocratic ( some specific scenarios ) Democratic ( recommended )

- Faster - Slower
 - One way communication - Two-way communication
- Management makes decision - Management presents
and tells staff problem and staff work
- Do this! together

Use - A time crunch - Preferred by employees

- Low skilled employers - High skilled, experienced
professionals

+ Productive, narrow scope for + Motivation, problem

errors, low cost solving, share ideas,
- Low morale + satisfaction, development of leadership
counter productive, staff skills for future
turnover - Go off track, relies on
skilled staff, time, need for
regular meetings

Laissez-Faire - Do this or that, you choose ( in the middle )

OR Participative Democratic - Leading based inclusion of staff in processes of
decision - two-way communication, less fast but better morale - negotiation

Directive - Ordered, immediate compliance - CRISIS management

Visionary - Big picture, LT - big changes
Affiliative - Family etc, harmony - motivation loss and consensus decisions
Coaching - growth, developmental - improve performance, LT strengths

● job design – general or specific tasks

Job design is the number, kind and variety of tasks that a worker is expected to
carry out in the course of performing their job.
- Job rotation means employees switch for a period of time for variety
- Job enlargement - employees are given challenges, variety
- Job enrichment - given more control and interdependence
Specific tasks are specialised, general tasks for variety

● recruitment – internal or external, general or specific skills

Recruitment is the process of locating and attracting the right quantity and quality
of staff to apply for vacancies at the right cost.

As a strategy it can help attract and retain potential employees, develop their skills
and reduce dissatisfaction.

Prior to recruitment: skills, assess the need, job design etc.

Internal Recruitment - appointing an External Recruitment - outside the

existing employee to a new position business: referrals, adverts, recruitment
 agencies, websites e.g. indeed

+ Motivational + Wider applicant pool

+ Commitment, loyalty + Get specific speciality
+ Clear career succession + New skills, values, experience
+ Encourage efficiency, productivity + Less internal politics
+ Type of reward = promotion
+ Cheaper
+ Alr know company culture

- Reinforce bad cultures - Risk of unknown staff

- Rivalry - Orientation phase
- Discrimination issues - Time, effort cost
- Demotivated = unsuccessful - Loss of motivation for internal
- No new value staff, bad for culture
- Need to fill old role

General skills - basic skills and attitudes that staff need to display e.g.
interpersonal skills, positive attitude

Specific skills - highly specialised and generally attainable through education/

training ( degree, qualified trades )

● training and development – current or future skills

Training: Process of teaching staff how to perform their job more efficiently and
effectively by boosting their knowledge and skills

Formal off-the-job:
- Barista Academy - McCafe
- Universities, specific courses
- Facilitated by institutions or organisations
On the job:
- Informal, while they are working
Other experienced employees

Critical to the shortage of skilled labour experienced in Australia today.

Development: Refers to activities that prepare staff to take greater future

responsibility – enhancing skills in line with business growth.

Business gets better employees, employees are motivated.

Remember induction, training, organisational development, mentoring and coaching,

performance appraisal
 ● performance management – development or administrative

A continuous process to promote and improve employee effectiveness and

achieve business goals

Developmental: Data to develop the individual skills and abilities of employees →

improve performance, address weaknesses + promotion?
+ HR planning
+ Shows effectiveness of recruitment and selection strategies
+ Identify legal compliance needs
+ Build ‘best practice’ culture

Administrative: Provides information ( after appraisal ) which can be used by HRM to

plan training, development, rewards, benefits etc. – assess overall achievement of
business goals.
+ Productivity, financial performance
+ Compare entire organisation to agreed standards
+ SWOT for training + coaching

1) Set clear expectations

2) Assess regularly
3) Provide regular feedback
4) Continuous development to upskill!

E.g. progress reports, interviews with staff, ask questions such as: what have you
done well? Biggest achievement this year? Future career goals? Ask for feedback
and concerns? = to improve HRM itself

● rewards – monetary and non-monetary, individual or group, performance pay

Monetary rewards are reflected in pay or have financial value.

- Direct ( cash ) - pay increases, overtime, bonuses, profit sharing
- Indirect ( benefits ) - insurance, superannuation, childcare, flexibility in work,
holidays

Non-monetary rewards don’t and include social activities or retirement planning.

- Job: interesting work/ project, performance feedback ( positive ), recognition
e.g. employee of the month, promotion
- Environment: overall improvements to the work environment e.g. HR policies
+ safe and healthy work environment, opportunities for development

Individual vs Group Rewards

- Individual = rivalry, instead reward the whole team’s cooperation
- Sometimes personal recognition is good too, acknowledge stand outs

A remuneration system helps reinforce culture and values and build a good corpoate
culture - a motivating tool.
Performance pay - a system where someone is paid proportional to how well they do
+ increase productivity, offers employees control, attracts top talent BUT
- requires constant oversight and appraisal, affects teamwork

● global – costs, skills, supply

Globalisation has increased competition + opened up overseas labour options.

+ Australia has high labour costs + shortage of skilled labour
+ Cheaper sources, wider pool, low cost skill

Cost:

High cost of living and wages in Australia but can be reduced + maintain
competitiveness by cheaper overseas labour. Usually outsourcing manufacturing
services from highly populated SouthEast Asian Countries.

Other departments e.g. accounting, telecommunications, sales, legal work is also

globally outsourced – for regular outsourcing reasoning.

Skills

Either employ skilled workers or offer training to their employees.

Small population of Australia - high shortfall of skills VS China + India a total of 10

million graduates per year.

Use: temporary work visas ( go against trade union - protecting Aussie work )

Govt policies allow workers to be brought to Australia on a Temporary Work Visa as

well.

Supply

South East Asian countries with a huge supply of workers, allowing them to move
here especially in difficult-to-fill roles such as IT.

Also when businesses move production or expand overseas they access a larger
supply of skilled labour.

● workplace disputes

A workplace dispute is a disagreement over an issue between an employer and it’s

employees resulting in a stoppage of work.

Conflict between stakeholders is inevitable due to conflicting interests + can lead

to reduced indicators and productivity → dispute resolution strategies.
 – resolution, negotiation, mediation, grievance procedures, involvement of
courts and tribunals

Grievance procedures: rules and procedures that employees, unions and employers
must follow to resolve disputes.
- Clear, direct communication
- Step-by-step
- Required by government regulations

Negotiation: Involves discussions between parties in an effort to compromise and

reach an agreement. Union delegates may represent employee.

Mediation: A third party that is invited to facilitate a discussion to assist parties to

solve the dispute - they are neutral. Not a legally binding outcome.

Conciliation: Semi-formal process, highly trained third party assists in the

discussion → agreement, legally binding outcome if parties agree to terms.

Arbitration: A formal process case is put before a Fair Work Tribunal. Magistrate
hears both sides + makes a legally binding decision.