Business Mgmt original slides 26.5.11

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The Ascent of money
NEW TOPIC! MANAGMENT
PROCESS txt pg. 98
Management process

Coordinating key business functions and
Resources

Use KRB as an example to identify key
business functions and appropriate
resources
Coordinating key business functions
and Resources
Identifying business functions:
 Core business function
 Other functions

◦ Profit to owners/shareholders
◦ Supply a products/service to consumers

Coordinating business functions
◦ Planning each part of the production of product or any stage or
production

Planning operations
◦ Production, marketing, finance and HR are coordinating units

Markets for goods and services
◦ Place where the consumer (buyer) and producer (seller) meet.
◦ Wholesalers and retailers
◦ Today also have stock market/e-commerce
Identifying the Business Functions
Operations
Organising the production of goods and services. Includes:- business
location, premises layout, number of employees, types of equipment
Employment
relations
Organising the human resources. Hiring and firing, finding right skills,
training, motivation.
Marketing
Link between the business and the consumer. Drives the business.
Identifies what consumers want and then plans to meet these wants
at an acceptable price. Includes promotion.
Accounting and
Financing
Provides the financial resources. Controlling how finances are used
and regular reports on the business’s operation.
Operations
Human Resources
Marketing
Accounting and Finance
Operations
Human Resources
Marketing
Accounting and Finance
28 min. Using Holden as a case study,
this program looks at the four key
functions performed in business on a
daily basis: manufacturing operations;
human resources; marketing and sales;
and finance.
Take down five terms on each of the four business functions to write a
paragraph on each at the end of the video.
Key business functions of...
HOLDEN AND KBF’s
Which functional area is most important to
the operation of Holden Ltd?
Could the organisation exist without any of
the functional areas?
Would Holden benefit from outsourcing
any of the functions?
Holden's
new solar
powered car

Imagine that Holden
has decided that it
wants to develop a new
solar-powered car.
Explore how each of
the 4 functional areas
discussed in the video
might be affected:
Manufacturing
Operations, Human
Resources, Finance and
Marketing & Sales in
terms of the key
management roles of
planning, leading
organising and
controlling.
Vice President Google
Mich Mathews
You have been appointed CEO of Holden!
Your first thought is that you want to know
how successful each functional area of the
organisation has been lately.
 Suggest 3 Key Performance Indicators that
would be appropriate to evaluate the
success of the 4 Functional Areas discussed
in the video.
 What evidence of success was shown in the
video?
Coordinating the Business Functions
The different functions of the business are INTERDEPENDENT.
Small business owners are closer to their customers than large
business. Large business managers may even lose touch with
their business operations. Shareholders may have very little to
do with the day to day running of the business.
Business Mission
Business Plan
Determines general direction,
organisational objectives and strategies
Functional Plans
Outline how each function will achieve business objectives
Operations
Employment
Relations
Marketing
Accounting and
Finance
KRB: key business functions and
appropriate resources
IN PAIRS ON POSTERS COME UP WITH
KRB’s KEY BUSINESS FUNCTIONS AND
WHAT RESOURCE EACH FUNCTION
NEEDS
Management: Operations
goods and/or services
 the production process
 quality management

goods and/or services
What is a good and what is a service...do any
businesses provide both?
GOODS VS SERVICES

GOOD: An item that is tangible. It can be
seen or touched.;E.g...

SERVICE: An intangible good that is
provided by an individual or organisation;
E.g...
The production process
What is the production process of a ...?
 Surfboard
 Chocolate
 Cheeseburger
 designer dress
 Cookies
 Car wash

The production process





Organising operations in a business involves
managing the production process.
The production process includes identifying and
procuring the inputs that will be transformed by
the business into the final goods and services.
MANUFACTORING – transformation in factory
SERVICES – transformation in offices
In organising production the business
managers will try to reduce cost, maximise
efficiency and provide quality goods and
services
Production process

Division of labour
◦ Breaking down tasks to the simplest level and
designing jobs and employing people to do these
jobs
◦ Division of labour brings advantages to an
organisations as people become SPECIALISTS
they become more EFFICIENT

Specialising promotes efficiency
◦ Workers rely on other people working in their
specialised job to supply the products and
services they need. Who does a heart surgeon
or tennis professional rely on?
The way that businesses create
products and services is known as
the production process.
There are three main parts to the production process:
A firm must purchase all the necessary inputs and then transform them
into the product (outputs) that it wishes to sell. For example a football
shirt manufacturer must buy the fabric, pay someone for a design, invest in
machinery, rent a factory and employ workers in order for the football
shirts to be made and then sold.
How well-organised a firm is at undertaking this transformation process will
determine its success. This is known as the productive efficiency of a
firm and it will want to be as efficient as possible in transforming its inputs
into outputs (i.e. using the minimum number of inputs as possible to
achieve a set amount of output). This will reduce the cost per unit of
production and allow the firm to sell at a lower price.
Ultimately, the objective of the production process is to create goods
and services that meet the needs and wants of customers. The
needs and wants of customers will be met if a business can produce the
correct number of products, in the shortest possible time, to the best
quality and all at a competitive price.
The Production of Goods and Services
Involves the management of:
•people
•capital
•information
•raw materials
Role of Operations
Design
Operation of
Control of
Transformation
that
Processes
convert
Each Step Adds Value
Raw Materials,
energy and
labour
into
Finished
goods and
services
The production process

Discuss the concept
of ‘the production
process’ and
construct work flow
charts demonstrating
production of goods
and/or services

http://www.thesourc
esurfboards.com.au/h
ome
?
Goods or
Services
Production process

In worksheets discuss the concept of ‘the
production process ‘and construct work flow
charts demonstrating production of goods
and/or services
The future of food production

No-till agriculture
Feeding the world's
growing population
will require changes
to the way we grow
things. This might
mean leaving the
plough behind
Chain of command
Chain of command
Refers to the way a business structures its
channels of authority, power, accountability
and responsibility
 In a traditional business the chain of
command starts with the CEO
 Authority and power will move down
through various levels (or links) of
management, supervisors and workers.
 Accountability (and information) moves back
u through these links to the CEO

Chain of command continued

The chain of command can be shown as an
organisation chart
◦ Authority refers to the right a manager has to make
certain decisions and to require a subordinate to carry
our certain tasks in a satisfactory way.
◦ Power is the ability to cause subordinates to do what is
required of them
◦ Responsibility is the duty an employee has to c ary out
certain organisation al tasks or functions
◦ Accountability who has authority over them
All workers are responsible for something and accountable
to someone. The chain of command can be organised by
function, product, geography or customers.
◦ See pg. 102
Chain of command by function
Organising chain of command is common
and can be effective if each functional area
does not need to collaborate closely with
other departments...e.g.? Head of HR,
Finance, manufacturing and marketing and
reporting to CEP
 E.g.

Benefits of chain of command by
FUNCTION
Easy to understand
 Forms a basis for specialisation
 Staff with similar interests and skills can
be grouped together
 Upper levels of management are likely to
be aware of the needs and contributions
of the functional areas

http://www.wesfarmers.com.au/
Quality management

Define ‘quality management’ and its
importance
Good + Service
Quality management
Goal of every business should be to create the
best possible product and/or deliver the best
possible service.
Businesses that can deliver high quality
products and services will gain a
competitive advantage over other similar
businesses e.g. http://www.apple.com/au/
QUALITY : A FOCUS FOR
OPERATIONS

Quality management will only be attained
if all the employees in operations are
committed to achieving and maintaining
quality output...

Is this easy to achieve?
Quality management
at each stage of the production process
 Provide scenarios for an SME .......
 How do managers ensure high quality?
 What would a good manager do to rectify
poor quality products/services?
Total quality management
All aspects of the operations process
INPUTS, PROCESSES, AND OUTPUTS
are all subjected to
constant quality
analysis and
monitoring

..constant assessment and
improvements to
promote total quality
Quality Control
Inspection
International Quality Standards
TQM
Quality Circles
Continuous improvement
Working Capital =the money needed for the day-to-day requirements of business.
DISADVANTAGES of JIT - unable to meet sudden increases in demand, great reliance
on suppliers and employees, huge problems if any part of the system breaks down, loss of
discounts related to bulk buying.
Customers define quality. It is different things to different people. But customers
demand a high level of quality or they will switch to a competitor.
Quality Control =
Inspection of products to see it meets the need of the
customers.
Quality management

Define ‘quality management’ and its
importance at each stage of the production
process
Quality Management

How do managers ensure high quality?

What would a good manager do to rectify
poor quality products/services?
TERM TWO
Management process
–coordinating key business functions and resources
–operations
•goods and/or services
•the production process
•quality management
–marketing
•identification of the target market
•marketing mix
–finance
•cash flow statement
•income statement
•balance sheet
–human resources
•recruitment
•training
•employment contracts
•separation – voluntary/involuntary
–ethical business behaviour
management and change
–responding to internal and external influences
–managing change effectively
•identifying the need for change
•business information systems
•setting achievable goals
•resistance to change
•management consultants
Management process: marketing
identification of the target market
 marketing mix

The economist
http://audiovideo.economist.com/?fr_chl=8c
9fb7cb6ccca6fb5c1058e006b34355a6ec14
1c&rf=bm
What is marketing?
Distinguish between marketing and sales
http://www.smh.com.au/
Definition of marketing

Those functions in a business that directly
involve contact with the consumer and
assessment of their needs, and the translation of
this information into outputs for sale.

Marketing is the process of developing a
product and implementing a series of strategies
aimed at correctly promoting, pricing and
distributing the product to a core group of
customers.
Targeting consumers
Why is targeting consumers and identifying a
‘target market’ so important?
What sort of magazines/TV shows do you read
and watch? What products are advertised?
Have you heard of a ‘target market’ what does
this term mean in your own words?
Identification of the target market

A business needs to clearly establish who
the consumers of the product are and
them aims its efforts to gain sales towards
that market.

E.g. Skim milk, chocolate, surfboards...who
are their target market?
TARGET MARKETS

Most product promotions will be targeted so
they appeal to a specific:
◦ Age
◦ Social group: middle aged men/women, affluent,
young women
 Each specific group is a TARGET MARKET
 As a class look at different websites and notice the differen
ads
TARGET MARKETS

Mass marketing: product used by a large

Niche marketing: small and exclusive market.
proportion of the population: food, household
items: usually not specific
Ski equipment, luxury cars, adventure holidays>
IMAGE promoted is most important
Wise to target a specific group?? YouTube clip
Take five points down from this clip!

MARKET SEGMENTATION


Market segmentation occurs when the total market
is subdivided into groups of people who share one
or more common characteristics.
Otherwise known as target markets.
Markets can be segmented on the following four
variables;
◦ Demographic – age gender, ethnicity, income,
occupation etc.
◦ Geographic – Urban, rural, climate, region
◦ Product related – regular user, new user, brand
loyalty price sensitivity
◦ Psychographic – personality, motives, lifestyles

Eg. Nova 96.9 only wants 18-39 year olds to listen so
they don’t play Frank Sinatra. They then have a
valuable product to sell to advertisers.

The Toyota Tarago has also been developed for a
certain market segment.
Processes used to identify target
markets

Market research: surveys in person/via telephone,
demographic/social group, specific questions about the product

Focus group: a group of potential consumers chosen at
random, brought together and asked to respond to a campaign
developed to promote a particular good or service..Advertising
agencies, check whether there is a demand
MARKETING MIX
THE 4 P’s
PRODUCT
 PRICE
 PLACE
 PROMOTION

Marketing Mix

Summarise product, price, place and
promotion

Read text then summarise
Marketing Mix
Product
 Brand, packaging, positioning (healthier)
Price
 Matching its cost of production to the needs of its targeted customers. Will the
price be set low and aimed at the mass market or will it be set high and aimed at a
specialised market? What is problem with too low/too high pricing?
Promotion
 Sales promotion
 Personal selling
 Advertising
 Print, radio, TV : choice of medium will depend on the products, audience, frequency of
publication, coverage, cost of reading audience
 Customer service
Place
 Transporting/storing goods and getting them to the consumer at the right time.
1/5th of the cost of a product is taken up in distribution.
 Warehousing/storage/transport
 Inventory: Just in time (JIT) in modern businesses stock is held in the form of
finished goods, component or raw materials.
Marketing
In worksheets
 Discuss the meaning of ‘marketing’
 Distinguish between marketing and sales
 Define the concepts ‘target market’ and
‘marketing mix’
 Using examples in worksheet identify relevant
target markets
Marketing Australian red meat
in Australia and around the globe
Brochure
 Handout to be completed

“The Pitch”
Your marketing team has been given the challenge to create a marketing strategy for a new
chocolate bar to be released in December.
Your team of 3-4 will need present the following information to the board of directors (i.e.Yr
12 Business Studies class):
Identify your target market (include method of segmentation)
Develop marketing strategies
Product - branding, packaging, positioning
Price - Propose and justify a pricing strategy
Promotion - Select 2 forms of promotion to “sell” to the board. Outline the advantages of your
forms of promotion.
Place - Type of distribution channel, channel choice and address any physical distribution issues.
Present your strategy in the form of a brochure
Beau’s Floral Studio – A Marketing
Plan

Examples from 2010
Marketing Mix:
recap/promotion/advertising
M&C Saatchi is a global marketing services business
working for clients across a wide variety of industry
sectors.
 The Company was founded in 1995. Starting with a
strong base in the UK and Australia, we have added new
agencies and disciplines in Asia, USA and Europe,
employing over 1,2850 staff in 22 countries. The
Company was listed on AIM in 2004.
 http://www.lse.co.uk/SharePrice.asp?shareprice=SAA

M&C Saatchi wins Austrade
contest to market Australia
Simon Canning
From: The Australian
April 26, 2010 12:00AM
FORMER Tourism Australian and Tourism New Zealand advertising agency M&C Saatchi has
won the job of building brand Australia for Austrade.
The agency, which has also been involved in nation-branding and tourism projects in the US and the Middle
East, will assume the $20 million project to market Australia as an export and investment nation.
More than 60 advertising agencies from around the world pitched for the Building Brand Australia project
announced by the federal government last year, with four agencies making the shortlist.
Austrade took a number of concepts from the agencies and put them into research in 14 countries before
handing the account to M&C.
The contract will run for four years and will see an overarching brand developed to promote Australia. It
will run separately from tourism campaigns.
The concept will not be unveiled until next month.
M&C developed New Zealand's lauded 100 per cent Pure campaign before resigning the account to take on
Tourism Australia.
The agency's "So where the bloody hell are you?" campaign shot bikini model Lara Bingle to fame but faced
criticism from some industry sectors.
Last week Media revealed that two local executives, chairman Tom Dery and regional creative director Tom
McFarlane, had bought a 20 per cent stake in the agency for $5m from the parent company in London.
In the age of the brand, logos are
everywhere. But why do some of the
world’s best-known brands find
themselves on the wrong end of the
spray paint can — the targets of anticorporate campaigns by activists and
protesters?
 No Logo, based on the best-selling book
by Canadian journalist and activist
Naomi Klein, reveals the reasons behind
the backlash against the increasing
economic and cultural reach of
multinational companies. Analyzing how
brands like Nike,The Gap, and Tommy
Hilfiger became revered symbols
worldwide, Klein argues that
globalization is a process whereby
corporations discovered that profits lay
not in making products (outsourced to
low-wage workers in developing
countries), but in creating branded
identities people adopt in their
lifestyles.

FINANCE
cash flow statement
 income statement
 balance sheet

Finance
The financial statements (balance
sheets, profit and loss account and
cash flow statement) can be used
to check the performance of a
business entity.These statements
can be used to compare
businesses and to analyse trends

http://www.woodside.com.au/NR/rdonlyres/E4358161-A6CC-4514-B2C0D242F718618B/0/WoodsideInteractiveAnnualreport2010.pdf

http://media.corporate-ir.net/Media_Files/IROL/14/144042/Reports/2010AR_pp_67_to_176.pdf
ENRON
Financial Statements fudged: ABC radio
national.
Bigger than Enron..

http://topdocumentaryfilms.com/biggerthan-enron/
Finance (and accounting)
Accounting and finance support the operations of a business. Accounting
allows business performance to be monitored. It is concerned with
information management.
Money comes into the business (revenue) as a result or sales
Money goes out of the business (expenses)
And the flows are recorded. This is accounting.
Finance relates to the external sources of funding that allow the
business to perform its prime function and to make a profit using
borrowed funds
Larger businesses have separate departments however in a small
business the owner is often responsible for keeping the basic
records for accounting purposes and will outsource the final
accounting, auditing and financial advice to an accountant.
Source of funds (not in syllabus)
There are two ways a business can source
funds, can you think of what these are?
Source of funds:
INTERNAL AND EXTERNAL
Equity and debt
INTERNAL FUNDS
Business owners hold profit back to
reinvest in the business as ‘retained
profits’
 Owners equity

EXTERNAL FUNDS
When a company ‘goes public’ or is
‘listed’/’floated’ it means a business is
seeking shareholders to contribute funds
to the operation of the business
 Many organisations have floated
companies on the ASX
 Can all companies access money easily
this way? Why/why not?
 What is a blue chip company?

External Funds
Other funds are available these can be from:
Private funds: family, friends, personal loans
Banking: Overdrafts, bank loans
Merchant Banks: Investment, corporate financial advice, money
market
Finance companies: medium-term financing to smaller businesses
and companies. Active in lease financing and lending for equipment purchases.
Building Societies: deposits/housing loans. Many
now banks and can
loan money
Insurance companies and superannuation
funds
Financial markets
Debt vs Equity
Which is better?
Debt vs Equity

Debt financing comes from loans (borrowed funds).
The business goes to an outside source for the money
that it needs. The interest due from large loans needs
much consideration.

Equity financing comes from the owners of the business
– either retained profits or personal savings.

Small businesses will often re-invest their profits in
capital assets in an attempt to minimise taxation, such as
purchases that are tax deductable.
Employment contracts

Looking at examples provided to you of
employment contracts in different
industries and for different employment
types (casual, permanent, part-time);
identify similarities and differences
between the contracts
cash flow statement see pg. 127
Cash flow: businesses exist to make a profit..to keep up
with payments and financial commitments and stay active,
the business needs a steady flow of funds.
Liquidity: describes a business’s ability to meet its debts from
its cash inflows.
All aspects of a business depend on its ability to pay bills as
they become due. If it can’t pay its bills it will be declared
insolvent and cease to exist.
Cash-flow budgets will help a business predict if and when cash
shortages are likely to occur. Such shortages may need to
be covered by short-term loans such as bank overdrafts.
Regular (monthly) cash-flow budgets and statements allow
such needs for finance to be recognised and acted upon.
income statement
REVENUE STATEMENT or PROFIT AND LOSS ACCOUNT
Summarises the structure of the revenue that has come into
the business and the expenses that have been incurred in
running and operating the business.
See income statement on pg. 122
Through bookkeeping and accounting each business is able to
look at the GROSS PROFIT and NET PROFIT which will show
how the business is performing.
Gross profit vs Net profit
GROSS PROFIT
subtracting the costs associated with sales from the
value of sales (revenue)
NET PROFIT
deducting from the gross profit the other expenses that
were part of operating the business.
balance sheet – see fig on pg. 124
The final document that is produced at the
end of the full accounting process.
It is built on the accounting equation:
Assets = Liabilities + Owner’s equity
The balance sheet shows the owners all the things that have
been done with its earnings.
Balance sheet
Assets: items of value/there are 3 types
 Current assets: cash or items that can very easily
be converted to cash (stock, debtors, accounts
receivable and pre-payments)
 Non-current assets: more durable and more
expensive. Difficult to sell quickly (buildings,
furniture, land, machinery and office equipment)
 Intangibles: difficult to measure/value. Goodwill,
trademarks and patent rights and can be of great
value when selling
Balance Sheet
Liabilities: items that the business owes to other people
or organisations.
Current Liabilities: include short-term debts that
need to be paid within 12 months or the financial
year, bank overdrafts, creditors, accounts payable
and accruals.
Non-current liabilities: include mortgages (land,
buildings), and loans for large machinery and
equipment (usually large, long-term loans)
Balance Sheet
Owners’ equity: starts off with what the business owner
invests in the business..in larger companies owners’ equity is
replaces with shareholders’ funds
Paid-up capital: amount of money originally put into the
business – basis for determining the success of the
original investment
Reserves/retained profits: the amount added to the
original money put into the business. Often owners
have re-invested in the business or are preparing to do
so.
Net profit: figure calculated in the revenue statement for
a certain trading period, presented as net profit before
tax or a net profit after tax
Financial statements recap- in
worksheets
After looking at various businesses annual
reports online explain the construction of
financial statements, their role and
importance
 Using simple financial data construct
examples of all three financial statements
 Assess the importance of effective cash
flow management for business

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