Success in VCE Business Management
1. Keep notes and handouts organised (a workbook for any class
notes and exercises done and a folder with plastic sleeves for
handouts)
2. Prepare summary notes from the textbook(s) you have and the
slides referred to in class (summary diagrams or notes with
heading and bullet points etc.
3. WORK ON A CONSISTENT BASIS (a bit (30+ minutes) most days
not a lot one day and nothing for 6 days)
4. DO THE MAJORITY OF THE TASKS GIVEN TO YOU
5. MAKE EFFECTIVE USE OF CLASS TIME
6. Review the day’s lesson in the evening (look at the class slides /
read the textbook section
7. Have some interest in current events / affairs involving businesses
8. DO THE REVIEW QUESTIONS GIVEN TO YOU BEFORE AN
ASSESSMENT (SAC)
SUCCESS IN VCE = GETTING YOUR BEST RESULT
Involves a partnership !!!!!
VCE Business Management Unit 3 & 4
2013: SUMMARY NOTES
(3 to 4 weeks)
Outcome 1
On completion of this unit the student should be able to discuss and
analyse the context in which large-scale organisations operate.
http://www.vcaa.vic.edu.au/vce/studies/index.html
4
Key knowledge
• the context which contributes to the unique nature of large-scale organisations;
• characteristics of large-scale organisations;
• variations in types of large-scale organisations, their objectives and related
business strategies;
• typical management functions in large-scale organisations, including operations,
finance, human resources, marketing, and research and development;
• contributions, both positive and negative, of large-scale organisations to the
economy;
• internal and external (operating and macro) environments of large-scale
organisations;
• performance indicators used to evaluate the performance of large-scale
organisations, including the percentage of market share, net profit figures, the rate
of productivity growth, the number of sales, results of a staff and/or customer
satisfaction survey, the level of staff turnover, level of wastage, number of
customer complaints and number of workplace accidents;
• identification and characteristics of stakeholders of large-scale organisations,
including their interests, possible conflicts and related ethical and socially
responsible considerations.
5
Key Knowledge:
The context which contributes
to the unique nature of LSO’s
(Section 1.1 in textbook)
6
What is an organisation?
 2 or more people working together
 Has an internal structure:
- positions of responsibility
- tasks to be carried out by certain
people
 Use of ‘resources’... (human, natural,& capital (man-made)
to create a product or service (output)
 Has goals or aims to be achieved, as expressed broadly
in a ‘Mission Statement’ and ‘Vision Statement’.
• From goals or objectives, strategies (plans of action)
are undertaken to achieve those goals
What is an organisation?
 Adding these elements together, we arrive at
the following definition:
“An organisation is a structured arrangement
where two or more people work together to
achieve some specific purpose. They take
physical, human, capital (man-made) inputs, then
process them to create outputs of goods and/or
services.”
Examples: Large Scale Organisations
Large scale organisations
make up less than 1%
of all businesses in Australia
LSOs
Other
however, they generate
approximately 56%
of total revenue and are vital to Australia’s economy
LSOs
10
The unique nature of LSOs
• LSOs have complex management structures due to their size often
with many departments
• LSOs can produce of goods and services more cheaply than smaller
businesses because they produce large volumes and thus can
spread their costs over a greater number of units produced; LSOs
can take advantage of ‘economies of scale’
• LSOs have access to large amounts of financial funds which allows
them to expand their business
• LSOs can influence Governments because of their size and their
needs (can influence legislation, the building of infrastructure etc)
• Operate in many countries
• Can have many owners who are not involved in the day to day
operations of the organisation
The growth of LSOs
LSOs have grown in number and size over the past 30
years due to:
 Globalisation of & deregulation of markets
- increased trade and
- movements of people and financial resources between countries
- Governments allowing more foreign investment and competition
from overseas businesses
 Improvements in technology and communications
- make it easier for organisations to expand nationally or
internationally, thus increasing their size.
• Larger businesses can take advantage of ‘economies of
scale’ ( lower unit cost of production as fixed costs can be spread
over more units produced)
Key knowledge:
Characteristics of LSO’s
(Section 1.1 in textbook)
13
Characteristics of a ‘LSO’
 More than 200 employees (Australian Bureau of Statistics definition)
 Turnover / sales / revenue in the millions of $ per annum
 Profit in the millions of $ per annum
 Assets in the millions of $
- items of value: land & buildings, cash, machinery, furniture, equipment, vehicles etc.
- Generally accepted that LSO assets worth > $200 million
 Numerous branches / outlets nationally or internationally
“a large network of stores nationally”,
“transnational corporation”,
“multinational corporation”
Characteristics of a LSO
 Large percentage of the market share in their industry
Eg: Woolworths has 45 % of the market share in the food and liquor industry
What is meant by market share ?
Number of customers compared to
____________________________________
Total number of customers in that industry
Sales revenue or profits achieved compared to
________________________________________________________________
Total sales revenue or profits of all businesses combined within the industry
CHECKLIST- Characteristics of a LSO
 Employ over 200 employees
 Over $200 million in assets
 Extensive operations, often multi-national
 Significant percentage of market share
 Revenue and profits in the tens of millions of dollars
Large Scale Organisation?
Examples of LSOs
 Qantas
- 36000 employees
- Sales revenue $16.2 billion
- Profit (after tax) $970 million
- Over 200 aircraft (assets)
- 36,449,000 passengers carried to 140 destinations in 37 countries
 BHP Billiton
-
 Amcor Ltd
41000 employees
Sales revenue U.S $59.5 billion
Profit U.S $15.4 billion
100 operations (mines) in 25 countries
- 21000 employees
- Sales revenue $11 billion
- 260 factories in 38 countries
ACTIVITY- LSO Characteristics
2009 BUS MGT EXAM
Question 2
Wombat Airlines is a large-scale .......
a. Describe two characteristics that would
identify Wombat Airlines as a large-scale
organisation.
Typical management functions in large-scale
organisations, including:
•
•
operations
finance
•
human resources
•
•
marketing
research and development
(Unit 3 Area of study 3)
(Unit 4
Area of study 1)
(Section 1.1 in textbook)
20
A Typical Organisational Structure
Chief Executive Officier
(CEO)
Board of Directors
Human
Resources
Finance
Operations
R&D
Marketing
Other functions may include:
•
Information Technology, Public Relations, Legal etc.
What are Management Functions?
• The functions of management are the different
key areas of work within an organisation
These functions or departments include such
areas as:
– Operations
– Finance
– Human Resources
– Marketing
– Research & Development
Management Functions
• Operations Manager
– Deals with the actual production of goods and
services
• Finance Manager
– Deals with the monetary, accounting and financial
aspects of the business including preparing
accounting reports and financial budgets
• Human Resources Manager
– Deals with recruitment, training and well being of
the staff, employees
Management Functions
• Marketing Manager
– Deals with promotions, prices and distribution of
products, as well as gaining new customers
• Research & Development Manager
– Deals with the generation of ideas and the
development of new goods and services, as well as
testing the quality of the product.
ACTIVITY- Management Functions
Classify the following activities according
to their management function:
– Preparing monthly profit reports
– Recruiting new employees
– Running an employee in-house training program
– Planning the production ‘runs’ for the next month and
maintaining machinery & equipment on the
production line
– Reviewing the organisation’s OHS policy
– Preparing a new television advertising campaign
– Developing a new and improved product
Key knowledge:
Variations in types of LSOs, their
objectives and related business
strategies
(Section 1.2 & 1.3 in textbook)
26
Types of LSOs
Large Scale Organisations can be of 4 main types:
1) Corporations (Companies)
2) Not for Profit Organisations
3) Government Departments
4) Government Business Enterprises
(GBEs)
Types of LSOs
1) Corporations
 owned by ‘shareholders’
 managed by a ‘CEO’ & a board of management (‘Directors’) who
are elected by the shareholders
 Aim is to maximise profit for shareholders
 Owners (shareholders) have LIMITED LIABILITY (not personally
responsible for the corporation’s debts if it is unable to pay them)
Two types of corporations:
 Public Companies (………….Ltd)
 Private Companies (……….. Pty Ltd)
Types of LSOs
 Public Companies
…………
Ltd
 Are listed on the Australian Stock Exchange (ASX)
Listed companies – ASX
 Raise funds by offering shares (units of ownership) to the public
via the ASX
 Unlimited number of shareholders (At least 5+)
 Public is able to buy and sell their shares (units of ownership) in
the Company
 Shareholders are able to receive dividends (part of the profit)
based on the number of shares they hold. Dividends are declared
once or twice a year
Types of LSOs
 Public Companies
…………… Ltd
 Shareholders are also entitled to vote at the Annual General
Meeting (AGM)
 Why be a shareholder in a public corporation ??
• Shares may increase in value if the company makes good
profits (your investment is worth more)
• Receive dividends hopefully at least once a year
What is meant by ‘market capitalisation’ ?
 The total number of shares held by the public x Value of each share
 Basically, it is a measure of the overall value of the listed company.
Types of LSOs
 Private Companies
(…………………….Pty Ltd)
 Not listed on the ASX (don’t initially need to or want to raise funds
from the public)
 Created by individuals who buy the units of ownership and
become the shareholders (often family members). THEY
COMMENCE A PRIVATE COMPANY RATHER THAN A PARTNERSHIP
OR SOLE TRADER BECAUSE THEY WANT THE BENEFIT OF ‘LIMITED
LIABILITY’ !!
 Maximum of 50 shareholders
Examples
Rip Curl, Retravision, 7-Eleven.
Types of LSOs
2) Not for Profit Organisations (also called NGOs –
non-government organisations)
 Private sector organisations, such as charities and
foundations
Charities - ultimate objective is to lessen social problems to benefit
the community
Foundations – set up to raise money for a particular social issue and
raise awareness of that issue (eg Leukaemia Foundation)
Examples
Salvation Army, World Vision, Australian Conservation Foundation.
Types of LSOs
3) Government Departments
 Exist to implement Government policies and provide important
services to society
 Operate on a pre-determined budget (It receives money from the
Government each year which it spends on services it is
responsible for. It does not generate revenues / sales. It just
spends money allocated to it for the year. It does not produce a
profit.
 Headed by a ‘Minister’ (an elected member of the Government
selected by the PM/Premier) with Government employees (public
servants) in the department
Examples: Department of Agriculture Fisheries and Forestry /
Defence / Health and Ageing / Education, Employment and
Workplace Relations / Foreign Affairs and Trade
Types of LSOs
4) Government Business Enterprises (GBEs)
 Not listed on the ASX
 Owned & operated by the government (public sector) – they are
not shareholders
 Government elects a management team to operate the
organisation (Board of Management)
 Has sales revenues and expenses (costs) like a corporation
 Aim is to maximise / produce a ‘healthy’ profit like a public
corporation but also there is a community service aspect
Examples
Australia Post, Medibank Private, Vic Roads.
Types, Objectives & Strategies of LSOs
Private Sector
Owned by Private individuals
Private
Company
Not on ASX
Public
Company
Listed on ASX
2-50
Shareholders
5+
Shareholders
Restricted
transfer of
shares
Shares traded
on ASX
Objective to
make a profit
for
shareholders
Objective to
make a profit
for
shareholders
Rip Curl Pty
Ltd
Qantas
Airways Ltd
Non Profit
Organisations
Charities &
Foundations
Objective to
raise funds to
provide for a
cause or for the
disadvantaged
World Vision
Australia
Salvation Army
St Vincent De
Paul Society
Public Sector
Owned and run by the Government
Government
Business Enterprise
Run like a
Corporation but
NOT ON ASX
Profit but also
service motivated
Make a profit for
the government but
also to provide a
service
Australia Post
Medibank Private
Government
Departments
Seen to be
inefficient
Bureaucratic
(Minister in charge
with many public
servants)
Service motivated
Does not generate
sales
Given a
predetermined
budget (money) to
spend each year
Defence Dept
Key Terms
• Privatisation (GBE turns into
Public Corporation)
– Where a government business enterprise (GBE) is sold to
private investors or floated on the ASX, and the business is run
primarily to make a profit; (i.e. Public sector asset or
organisation now becomes part of the private sector)
– Governments traditionally are seen to run inefficiently so
privatisation will mean:
 Cash injection for the Government because they sell it
 lower prices for consumers as the business becomes more
efficient to run and have lower costs
E.g. Telstra (89% shares held by public, and 11% by government)
CBA was once government owned
Key Terms
•
–
•
–
Public Sector
Government owned
Private Sector
Non-Government owned. Owned by private enterprise – individuals or groups
of people.
• Public Private Partnership (PPP)
– A joint venture between the Government and private enterprise in order to
complete a project.
– The government benefits by creating infrastructure for the community,
without having to finance the entire project , and the private organisation
benefits by gaining exclusive operation of the asset for an agreed period of
time in order to earn revenue.
E.g. Eastlink
Citylink
Desal plant in Victoria
Objectives and Strategies of LSOs
Vision Statement
Mission Statement
Objectives
Strategies (Plans of
action)
What is a Vision Statement ?
 A brief statement that broadly describes the future
direction and outlook of the organisation.
 It is the organisation’s value and philosophy
E.g. Telstra’s Vision
“To improve the way people live and work”
What is a Mission Statement ?
 Sets out the reasons for the LSO’s existence &
it’s principal activities
 what the corporation does
 why it exists
E.g. Telstra’s Mission
“We build technology and content solutions that
are simple, easy to use and valued by our
customers. We strive to serve and know our
customers better than anyone else”
What is a Mission Statement ?

Eg: Commonwealth Bank Ltd
“To be Australia’s finest financial services
organisation through excelling at customer service”

Eg: Coles
“To give the people of Australia a shop they trust,
delivering quality, service and value”
What are objectives?
 Describes the goals or aims of the organisation
for the short, medium and long term.
The purpose is to fulfil the company’s Mission.
Examples...
What are objectives?
 Financial Objectives
Includes the level of profits, market share and revenue.
Eg. Company may want to increase profits by 10% in 2011
 Service Objectives
Provide a level of service to the customers.
Eg. To reduce the time spent by customers on hold by 5%
before May 2011
What are objectives?
 Social and Ethical Responsibility Objectives
Becoming caring corporate citizens.
Eg. To increase donations to charities by 20% in 2011
 Environmental Objectives
Caring for the environment and reducing our impact
Eg. To reduce carbon footprint by 15% by 2013
What are strategies?
 Statements of actions or plans outlining how the
objectives are to be achieved
What is the link between objectives and
strategies ?
Objectives or goals are formulated based on the
organisation’s vision and mission and then plans of
action or strategies are formulated to ensure that
objectives are achieved
Key knowledge:
Contributions, both positive and
negative, of large-scale
organisations to the
economy
(Positive Contributions – Section 1.4 in textbook)
(Negative contributions – Section 1.5 in textbook)
46
LSOs- Positive Contributions
• LSOs contribute to the nation in many ways
including:
– Economic Growth
– Employment (direct & indirect)
– Research & Development
– Infrastructure growth
– Export Income
– Industrial Base
– Training and Skills Development
LSOs- Positive Contributions
• Contribute to ‘economic growth’
– LSO’s are continually expanding and producing more
products leading to an increase in the nation’s Gross
Domestic Product (GDP), which is the total market
value of all goods and services produced in Australia
in a year
– LSO’s contribute roughly 55% of Australia’s GDP
LSOs- Positive Contributions
• Employment (Directly & indirectly)
– LSO’s provide employment opportunities to
approximately 2.7 million Australians, the equivalent to
roughly 33% of private sector (non-government) employment
both directly (those who work in LSOs) or indirectly through
businesses that exist due to LSOs activities
• Research & Development – R&D
– LSO’s have the financial capacity and incentive to invest
heavily in innovation and invention to gain a competitive
advantage. Smaller companies may later copy these
innovations leading to overall increased efficiency. LSOs
spend approximately $8+ billion per annum on R&D
LSOs- Positive Contributions
• Stimulate Infrastructure Growth
– LSO’s force governments to invest in the provision of
essential services that allow for the expansion of
commerce and industry in such areas as roads,
railways, water, power, education, health and
telecommunications (especially when LSOs locate in
regional areas of Australia)
– This growth in infrastructure can also be utilised by
smaller businesses and society as a whole
LSOs- Positive Contributions
• Export Income
– LSO’s look to export their products to overseas markets,
thus generating export income for the Australian economy
and improving Australia’s ‘Balance of trade’ (Exports –
Imports)
– One fifth of the revenue of LSO’s comes from exporting goods
and services overseas. (Income received when other countries
buy our goods & services)
LSOs- Positive Contributions
•
Industrial base (variety of goods & services)
– LSOs increase and make a large contribution to the range of
products and services produced and available in Australia as well
as exported – we have a more DIVERSIFIED economy because of
LSOs
•
Training and Skills Development
– LSOs provide ongoing training and skill development to
employees thus increasing the skill base and productivity of the
Australian labour force
– Smaller businesses may also benefit by employing these former
LSO skilled workers if they change jobs to a smaller business
LSOs- Negative Contributions
• Although they make enormous contributions
to the nation, there are some negative
impacts that LSOs have including:
– Downsizing
– Outsourcing work
– Moving operations overseas
– Anti-Competitive Practice
– Environmental damage
– Perceived lack of community goodwill
LSOs- Negative Contributions
• Downsizing resulting in unemployment
– Downsizing is restructuring the organisation
resulting in a reduction in staff numbers in order to
cut costs and improve efficiencies and profits
– As LSO’s look to become more efficient and increase
productivity, they often look to reduce their
employee numbers. As a result, staff redundancies
are commonplace in LSO’s
LSOs- Negative Contributions
• ‘Outsourcing’ results in unemployment
– Outsourcing is the transferral of non-core business
activities to an external organisation. Examples include
telephone customer service, legal and accounting
services, IT services, cleaning, maintenance of
equipment
– LSO’s look to improve efficiency by having specialists
deal with areas of their business that are not their core
activities in order to reduce costs and increase the
quality of the service.
LSOs- Negative Contributions
• Anti-Competitive Practice
– May practise “bullying” behaviour by destroying
smaller competitors in their market through
undercutting prices or buying them out
– LSOs in the same industry may practise ‘collusion’ by
fixing prices in agreement with each other until such
time as smaller businesses can no longer compete
and there is little or no competition
LSOs- Negative Contributions
• Environmental damage
– LSO’s are often responsible for much of the
environmental damage we see on the planet through
pollution, poor waste management, environmental
accidents and excessive emission of greenhouse
gases.
– This often results in large economic costs to clean up
the damage and makes resources unusable for future
generations.
LSOs- Negative Contributions
• Perceived lack of community spirit
– At times LSOs are perceived as being too big and
heartless, treating consumers and employees poorly
– Import a lot of their materials requirements from
overseas rather than buying from Australian
suppliers
– Possibly argued that they don’t contribute / donate
enough of their profits to community projects
Key knowledge:
Internal and external (operating
and macro) environments of
large-scale organisations
(Section 1.6 in textbook)
59
The environments of LSOs
Internal Environment
Factors within the organisation that the organisation has control over
External Environment
Factors outside the organisation
that the organisation has some or
little control over. Made up of 2
environments:
Operating Environment
Outside factors which the organisation
interacts with in conducting business on
a day to day basis – some control
Macro Environment
Broader factors in society in which
the organisation operates – very little
or no control
60
The Internal Environment of LSOs
• The environment within the organisation itself.
• Within this environment a business has a high degree
of control or influence:
– Managers (Number of levels and positions)
– Employees (their tasks and responsibilities)
– Organisational rules, policies & procedures
– Corporate culture (shared values and beliefs)
– Structure of the organisation (departments)
– What & how the organisation produces it’s goods
and services and markets it’s product(s)
61
The External Environment of LSOs
• Factors from outside the organisation that impact
on business performance.
• The organisation has at times some control, little
or no control over these factors.
• External factors are further broken down into the
Operating environment
Macro environment
62
The Operating Environment of LSOs
• Those factors which the organisation interacts with in
conducting business often on a day to day basis
• The organisation may have some control over these
factors.
• Sometimes these external parties can affect change
within the organisation
Suppliers
Unions
Customers
Competitors
Banks
Protest & Lobby groups
63
The Macro Environment of LSOs
• Those broader factors in society in which the
organisation operates
• The organisation has no control over these factors
• These factors could either negatively threaten or cause
positive changes within the organisation
Examples include:
• Social and Demographic factors
ageing of the population
changing of society attitudes to issues (environment ?)
birth rates and migration (population growth)
64
The Macro Environment of LSOs
• Technological Developments
Invention and improvement of technology in the way
goods are produced and how communication takes place
• State of the economy (Domestic and Global)
Boom – high levels of employment, consumer spending
and production is high
Recession – high unemployment, low consumer spending
and production by business is low
• Legal and Political Issues (laws & changes of Government)
Governments create and can change laws and different
governments have different policies they would like to
implement. E.g. carbon tax, GST
65
The Macro Environment of LSOs
• Education standards and training facilities
Affects skill levels of job seekers and thus potential
employees for organisations, as well as the availability of
people with certain skills that the LSO needs
• Increased globalisation and trade between countries
Cheaper imports coming into Australia
(negative aspect of globalisation)
vs.
New markets for Australian businesses
(positive aspect of globalisation)
66
Key knowledge:
Performance indicators used to evaluate the
performance of large-scale organisations,
including:
the percentage of market share, net profit figures,
the rate of productivity growth, the number of
sales, results of a staff and/or customer
satisfaction survey, the level of staff turnover, level
of wastage, number of customer complaints and
number of workplace accidents
(Section 1.7 & 1.8 in textbook)
Performance Indicators
Percentage of Market Share
Net Profit
Rate of Productivity Growth
Number of Sales
Staff/Customer Satisfaction
Level of Staff Turnover
Level of Waste
Number of Customer Complaints
Number of Workplace Accidents
68
Performance Indicators (PIs)
• Specific criteria used to measure the efficiency and
effectiveness of the organisation’s performance.
Efficiency - how well the organisation using it’s resources
(human / capital / natural) to produce it’s output
(productivity) **aim to increase output without
increasing resources (inputs) or maintain output
levels with less resources (inputs) used
Effectiveness - how well is the business achieving it’s
objectives/goals
Mission/Vision Statement
More specific corporate goals
Department Goals
Individual employee goals
69
Efficiency (Productivity)
The levels of output (goods and services produced) from a
given amount of inputs (resources)
Current situation
Inputs
Outputs
$100000
to create
10 cars
Increases in productivity / efficiency
$100000
to create
15 cars
$90000
to create
10 cars
Decreases in productivity / efficiency ?
$100000
to create
____cars
$_______
to create
10 cars
Key Performance Indicators (KPIs)
Provide relevant and measurable data to evaluate a
business’ performance.
KPIs need to be ‘measurable’, ‘reliable’ (accurate),
and ‘comparable’ between periods of time within
the business and with other businesses.
Qualitative KPIs – KPIs based on opinion or personal
feedback / responses which are often subjective in
nature (e.g. Employee or customer feedback from
surveys)
Quantitative KPIs – Based on numerical data and can
be expressed in a numeric format. Objective in
71
nature.
Key Performance Indicators (KPIs)
Percentage of Market Share
The proportion of company sales (or customers)
compared to total industry sales (or customers)
expressed as a percentage
72
Key Performance Indicators (KPIs)
Net Profit figures
• Profitability measures the earning potential of an
organisation by looking at the revenue from sales
and subtracting the costs of production
From this, the amount of company taxes is then
subtracted to obtain a final profit figure.
Net Profit = (Revenue – Expenses) - Tax
73
Key Performance Indicators (KPIs)
Rate of Productivity Growth
• Productivity measures the amount of output
produced from a given number of inputs
(resources such as e.g. materials, time , labour)
• If the rate of productivity improves from one year
to the next, then the business is generally
performing well
E.g. 2million cars produced (outputs) in 6 months (input).
If in the next 6 months we create 2.5 million cars in 6 months our
Productivity, and therefore efficiency has improved by 25%
74
Key Performance Indicators (KPIs)
Number of Sales (Volume of sales)
• This is the number of units of a particular product
sold in a given period of time
• If the number increases, generally, the business
would be performing better
75
Key Performance Indicators (KPIs)
Staff/Customer Satisfaction
• The level of staff or customer satisfaction can be
obtained by way of a survey.
• For customers, it is the degree to which they are
happy with the products and the level or service
offered by the company.
• For staff, it is the degree to which they are happy
with the work, their environment and level of pay.
• If the level of satisfaction is increasing, the
company would be performing better
76
Key Performance Indicators (KPIs)
Level of Staff Turnover
• Staff turnover is the number of employees who are
leaving an organisation and is used as an indicator
of staff satisfaction.
• If staff turnover is high it generally indicates that
motivation levels are low amongst employees and
there may be issues that need to be corrected
77
within the organisation.
Key Performance Indicators (KPIs)
Level of Waste
• This is a measure of how efficiently the company
uses its resources
• Many resources are under-utilised or left over at
the end of the production process. This is known
as waste
• By reducing waste, organisations would reduce
production costs, reduce the costs of disposal and
the impact on the environment
78
Key Performance Indicators (KPIs)
Number of Customer Complaints
• This is a measure of customer satisfaction with the
products and level of service.
• It is important to realise that for every customer
who complains, there are many more who don’t.
• As this number is reduced, it is a sign that
customers are becoming happier with the quality
of the company’s output.
79
Key Performance Indicators (KPIs)
Number of Workplace Accidents
• This is a measurement of safety in the workplace
• Workplace accidents are not only bad for those
involved and diminish a company’s reputation, but
they also halt production and cost the company
money
• By decreasing the number of accidents through
providing a safe and healthy workplace, businesses
can increase employee productivity
80
Performance indicators to assess certain areas in an
organisation
• Operations (Production)
Rate of Productivity growth (inputs vs outputs), Number of times
production targets achieved, stock levels, level of wastage in
production, number of defective items produced, Number of items
produced per hour
• Safety
Number of workplace accidents, staff knowledge of OH & S, number
of days lost to accidents
• Environment
No. of environmental spillages, Money spent on environmental
improvements and community programs, amount of green house
emissions
Performance indicators to assess certain areas in an
organisation
• Financial Performance
Number of Sales (volume), Sales $ levels, Expense $ levels, Net
Profit $,
• Human Resources (HR) management
Training days per employee p.a, $ spent on training, % of vacancies
filled, level of employee absenteeism, length of service of staff, level
of staff diversity, Number of industrial disputes, Results of staff
satisfaction surveys, level of staff turnover (resignations)
• Marketing
% of market share, Number of sales (volume), Sales $ levels, results
of customer satisfaction surveys, Number of customer complaints
Key Terms linked to performance indicators
Benchmarking
• Measuring organisation’s performance against
that of the industry leader, which may be an
organisation in Australia or overseas, that is well
known for its excellence.
Best Practice
• Using the most efficient and effective techniques
in all management functions / departments to
achieve the industry benchmark
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Key Knowledge:
Identification and characteristics of stakeholders
of large-scale organisations, including their
interests, possible conflicts and related ethical and
socially responsible considerations.
(Section 1.9 in textbook)
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Who or what are Stakeholders?
• Stakeholders are any individuals, groups or
institutions who
- interact with the organisation
or
- have a vested interest in the activities,
conduct and performance of the organisation
• Stakeholders can be internal or external to the
organisation
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The Typical Stakeholders of a LSO
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Board of Directors and the CEO
INTERNAL
Management
Employees
Owners
[shareholders – if a corporation]
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


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Customers
Suppliers
Competitors
Unions
Consumer groups
Government
Government regulators
Financial institutions
Local Communities
Protest or lobby groups
EXTERNAL
[represent employees in the LSO]
[eg: ‘Choice’]
[Local/State/Federal]
[ACCC and ASIC]
[lenders of money e.g. bank]
[e.g Greenpeace]
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Conflicts Between Stakeholders Interests
•
At times, the interest of various stakeholders will conflict
as they have different expectations of the business
Possible areas of conflict between stakeholders include:

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Selling prices charged for products or services
The large profits made by organisations
CEO and upper management salaries and bonuses
Outsourcing of work to other businesses in Aust. and overseas
Wages of employees and conditions of their work
Overseas Suppliers of LSOs
e.g. sourcing cheaper raw materials vs quality control
poor ethical standards
countries with poor human rights records etc.
Can you think of any more?
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Stakeholder Conflict Activity
• Which stakeholders are likely to have conflicting
opinions about the following strategies?
– Outsourcing work or moving off-shore
– Wage rises for workers
– An increase in Bank Fees at the ANZ
– New policies about the use of facebook during
work hours
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Main Stakeholders and their Interests
Management
• Primarily profit driven, management generally represent
the interests of shareholders
• There is now an increasing understanding among
managers that being ethical and socially responsible is in
the best interests of the business
• As such management are now having to measure their
Triple Bottom Line:
Financial bottom line (profit)
Environmental bottom line
Social bottom line
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Main Stakeholders and their Interests
Shareholders
• People who are partial owners of LSO’s through the
purchase of shares
• They are generally interested in a solid return on their
investment, so are motivated by profit
• This may come at the expense of the company acting in a
socially responsible manner, as this costs money
• However many shareholders are now only purchasing
shares in companies that are known to be ethical and
socially responsible
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Main Stakeholders and their Interests
Employees
• Interested in fair wages and conditions, a healthy & safe
workplace, work-life balance and job security
• This can conflict with the interests of other stakeholders
such as managers and shareholders, as providing such
things can conflict with profitability in the short term
• Employees also are increasingly becoming aware of
ethical issues and many will now choose not to work for
companies who are not ethical or socially responsible
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Main Stakeholders and their Interests
Customers
• They are interested in lower prices, better quality
products and high levels of service
• Often customers will purchase products from
organisations known to be ethically and socially
responsible
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Main Stakeholders and their Interests
Unions
• Unions have the interests of employees at heart and
negotiate more favourable pay and conditions on
employees behalf
• The actions of unions can sometimes conflict with the
actions of other stakeholders such as shareholders and
management, as the level of profits may be impacted
upon by an increase in staff wages
• They are interested in companies acting ethically in the
way they treat their staff and in their Occupational
Health & Safety practices
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Main Stakeholders and their Interests
Suppliers
• Suppliers provide LSO’s with the raw materials used in
the company’s operations
• They wish for the success of the organisation so they can
guarantee continuing business
• Most organisations realise it is beneficial to deal with
ethical and socially responsible suppliers in order to
improve delivery times, enhance their own reputation
and improve the quality of their own products
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Main Stakeholders and their Interests
Community members
• Society expects organisations to act ethically and show
concern for the community
• They are interested in such factors as:
- the level of waste
- amount of greenhouse gas emissions
- the organisation’s carbon footprint
- whether they are supporting the local community
through sponsorships
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Main Stakeholders and their Interests
Governments
• Are interested in the tax revenue received from company
profits so are happy when companies announce large
profits.
• They also like the contributions companies make to the
economy such as to GDP and employment.
• However, they too are beginning to realise the
importance of organisations acting socially responsible
as global warming has a potentially damaging impact on
the economy
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Activity – Case Study “Chemco”
Chemco Pty Ltd is a large industrial chemical
manufacturer based in South Australia.
Chemco intends to build a toxic dump waste 10
kilometres from the country town of Woopidoo which
as a population of 9000 people, of which 900 are
directly employed in this LSO.
The waste dump is designed to comply with very strict
environmental standards and according to Chemco’s
CEO is vital for the long term survival of this
manufacturing facility.
It will significantly reduce the costs of transporting
waste to a depot 300 kilometres away thus impacting
positively on company profits.
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Activity – Case Study “Chemco”
 Which stakeholders would have an interest in this
situation and what would their stance be ?
Stakeholder
Stance
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Ethics & Social Responsibility (ESR)
Ethics
• Moral standards and principles that guide behaviour (many
businesses have a ‘Code of Ethics’ or ‘Code of Conduct’ for
employees)
Ethical Management
• Process of abiding by the developed organisational moral
standards and acting in a way that is deemed acceptable to the
interests of society as a whole
Social Responsibility
• A general concern for the well-being of society and an awareness
of the organisation’s impact upon society and the environment.
• Obligations a business has to the well being of its stakeholders,
over and above its legal responsibility.
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Ethics & Socially Responsible Management (ESM)
Triple Bottom Line
• In the past, companies would measure their
performance by predominantly looking at the
‘financial bottom line’. (final net profit figure)
• Companies are now expected to measure their
performance by taking into account ALSO social
and environmental performance as well as their
financial performance.
This is known as the Triple (3) Bottom Line
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Ethics & Socially Responsible Management (ESM)
ESM- Activity
1. Using the internet, research the ESM policies and
activities of 2 Australian LSOs (for your ‘Business
Profile’)
2. Complete the ESM activity for Woolworths
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