Business Studies Summary Google Docs

OPERATIONS
role of operations management

● strategic role of operations management
– cost leadership, good/service differentiation
Operations → business processes that involve transformation/production
- Production = conversion of inputs into outputs
Customer focus → minimising waste, fair value for labour, low cost, reflect changes in consumerism
Profit centres → aspects of the business that derive revenue and profits
Cost centres → areas which cost is attributed
Cost Leadership → aiming to have the lowest cost & be most price-competitive
CASE STUDY: McDonald’s

→ Mcdonald’s invested in a global training program (Hamburger University) to ensure efficiency and reduce
overall costs
● goods and/or services in different industries

Goods/Services Differentiation
Standardisation → making products that are all the same
Product Differentiation → distinguishing products
Differentiating Goods Differentiating Services
- Product features - Time spent on a service

- Product quality - Level of expertise
- Augmented features (add-ons - Qualifications and expertise of the service provider
or benefits) - Quality of the materials/technology used in service delivery
Goods Differentiation
Perishable goods → short lead times, distributed fast
Non-perishable goods → operations similar in all industries, more durable goods
Self-service → encouraging customers to take initiative
● interdependence with other key business functions

Interdependence → mutual dependency on one another
Interdependence with...
Marketing → producing goods based on market needs, marketing based on cost, product design affects
transformation
Finance → cost of production, labour costs
Human Resources → staff needed for production, technology changing operations, outsourcing specialists
influences
● globalisation, technology, quality expectations, cost-based competition, government policies, legal
regulation, environmental sustainability
Globalisation → removal of trade barriers between nations, operating on an international scale & develop
international influence

→ McDonalds has 37,000 restaurants in 120 countries
→ in 2018, McDonald’s ranked 11th on Forbes list of most valuable brands
→ 2017 report showed US$91billion in sales, showing success in maintaining competitive advantage by
adapting to global conditions
Supply chain management → managing the flows of goods and services, including transformation.
- Businesses need a reliable supply chain that is responsive to changes
Technology → the design, construction and application of innovation devices, methods and machinery in the
operations process.
- Administrative level → organisation, planning, decision making
- Processing level → manufacturing, logistics, quality management, inventory management

→ digital menu boards, automatic drink dispensers, online ordering apps
Quality → how well designed, made and functionable goods are.

- Expectations that people have of business determines the way products are designed, created and delivered.

→ after complaints of coffee quality, McDonalds made a promise in 2011 that coffee would be barista made.
→ in 2018, Mcdonalds started using fresh (not frozen) beef patties, despite taking longer to cook, quality was
improved
Cost-based Competition → derived from the breakeven point

Fixed costs = costs that do not change regardless of business activity
Variable costs = costs that vary in relation to business activity/level of production

→ in 2015, Mcdonalds dominated western Europe, other businesses attempted to compete by lowering their
prices
→ close focus on cost, helps them to maximise profits
Government policies & Legal Regulation → Work Health and Safety Act 2011, Fair Work Act 2009,
Superannuation Guarantee Act 1992, Racial Discrimination Act 1975, Taxation Act 1953 → influence business
operations

→ McDonalds is bound by obligations in relation to marketing, advertising, product safety and quality
guarantees (Australian Consumer Law 2010)
→ they must ensure conscionable conduct at a local, state and federal level
Environmental Sustainability → business operations shaped around sustainable practices

→ in 2012, McDonalds opened the Australia's first Green star accredited restaurant in VIC
● corporate social responsibility

CSR → doing more than just complying with the law, but having higher respect for people, community and
environment
Triple Bottom Line → financial profitability, social impact and environmental impact of a business.
→ McDonalds uses Australian suppliers when appropriate, helping domestic economy
● the difference between legal compliance and ethical responsibility

Legal compliance → abiding by local and international laws (eg. wages, content, leave, equal employment)
Ethical Responsibilities → operations meeting community and moral standards (eg. not exploiting workers, use of
natural resources)
● environmental sustainability and social responsibility

→ Businesses practices doing no harm to the environment as well as upholding moral and ethical standards.
Eg. recycling, sustainable development
operations processes
● inputs
→ transformed and transforming resources used in the transformation process in order to produce goods and
services
- transformed resources (materials, information, customers)

→ inputs that are changed and converted in the operations process
Materials → basic element of production: raw materials (essential substances in their unprocessed form),
intermediate goods (manufactured and used in further manufacturing)
Information → the knowledge gained from research, investigation and instruction

- External information = information from markets, reports, statistics
- Internal information = information from businesses financial reports, quality reports & KPI’s
- KPI = key performance indicators, criteria used to measure effectiveness/efficiency
Customers → their desires and preferences are the starting point of production
- Customer relationship status (CRS) = the systems that businesses use to maintain customer contac

→ Materials - 430 million hamburger buns, 90 million english muffins, 25 million kilos of beef etc.
→ Information - noticing a shift in preference towards healthier choices introduced grilled chicken, salads and
healthier combos
- transforming resources (human resources, facilities)

→ inputs that carry out the transformation process
Human Resources → co-ordinate and combine other resources to produce goods and services
- The way people work impacts how inputs are converted
- Employees are the single most important input into businesses
Facilities → the plant/office/factory/machinery used in the operations process.

- Help to create quality work environment

→ HR - has over 106,000 staff, front counter (greet customers & take orders), host (assisting customers using the
touch-screen machines), kitchen crew (prepare orders)
→ Facilities - grills, fridges, fryers, drink dispensers, coffee machines, bathrooms (quality facilities impact their
efficiency)
● transformation processes
Transformation = the conversion of inputs into outputs
- the influence of volume, variety, variation in demand and visibility (customer contact)
→ volume = how much product is made, volume flexibility is essential to responding to changes
→ variety = the mix of products made & services delivered
→ variation in demand = businesses aim to forecast demand to that adjustments can be made accordingly
→ visibility (customer contact) = contact through surveys, interviews, warranty claims and letters (customer
feedback shape what the businesses produce)

→ volume = changing volume of seasonal products (eg. frozen drinks and ice cream) to maintain short lead
times
→ variety = having breakfast, beef and chicken burgers, 16 drinks, 7 wraps and salads, 50 mccafe items
→ variation in demand = having contact to fast produce when fluctuations occur
→ visibility = customers can give online feedback using an online form or customer service line
- sequencing and scheduling

→ help to structure the transformation process
→ sequencing = the order in which activities i the operations process occur
→ scheduling = the length of time activities in the operations process take

→ McDonald’s sequences its process so that assembly of a burger can be managed in a way that is efficiency and
consistent
→ Manages timing of making friends, beef patties, nuggets, dispensing drinks
- gantt charts
- critical path analysis
→ gantt charts and CPA are scheduling tools.
Gantt charts = outlines activities that need to be performed, the order in which they need to be performed and their
duration
- Used for processes that have several steps
- Advantages: forces managers to take appropriate steps, makes it easier to monitor progress
Critical path analysis = scheduling method that shows what takes need to be done, duration and what is required
to do the tasks
- The critical path is the shortest length of time it takes to complete all tasks necessary
- technology, task design and process layout

Technology = application of science or knowledge that enables people to do new things
- Office technologies → mobile phones, computers, personal digital assistants, EFTPOS machines
- Manufacturing technology → robotics, computer-aided design & computer-aided manufacturing
Task Design = planning the flow of activities

- Define what needs to be done, identify who needs to do it, breakdown takes int specific skills, allocated
time and difficulty elements
Skills audit → formal process used to determine the present level or skill or skill shortfalls
Workplace layout → the way in which machinery and technology is orientated in the operations plant
Process Layout = arrangement of machinery so that they are grouped together by the function they perform
→ technology - online ordering on the ‘mymaccas’ app
→ task design - greet the customer, take their order, repeat order back, state the total
→ process layout - kitchen layout is based on appliances used to make a specific product
- monitoring, control and improvement

Monitoring → measuring actual performance against planned performance (typically measuring KPIs)
Control → when KPI’s are assessed and corrective action is taken if required (comparing what was intended to
what actually happened)
Improvement → systematic reduction of inefficiency, wastage, poor work processes and bottle necks
- Bottlenecks is a process which slows down the overall processing speed
● outputs
→ the end result of business efforts - the good/service provided or delivered to the customer
→ must be responsive to customer demands
- customer service
→ how well the business meets and exceeds the expectations of the customer
→ if not satisfied, processes need to be reviewed

→ seeks customer feedback thorough in-store questionnaire
→ recruiting staff that are customer-centred and friendly
- warranties
→ a promise made by the business that they will correct any defects in the goods/services
● operations strategies
- quality, speed, dependability, customisation, cost
Quality → the quality of a good or service determined by customer expectations

- Quality design (high grade materials, functionable), quality of conformance (meeting standard of
prescribed design), quality of service (reliability of service, time efficiency)
Speed → the speed of response (time between product request and getting it)
- Aiming to satisfy customer demands as fast as possible
- Goals = reduced wait times, shorter lead times, faster processing
Dependability → how reliable products are
- How long they can be used before they fail
- Eg. warranty claims
Flexibility → how quickly operations processes adjust to changes in the market
Customisation → creating individualised products
Cost → the minimisation of expenses so operations is cheap as possible
Eg. through new technology

→ quality - fresh meat and vegetables
→ speed - 11 seconds to toast a bun, 20 seconds to assemble burger, 14 seconds to wrap burger
→ customisation - create your taste menu
→ cost - changes in minimum wage in the US caused Big Mac’s to go from $3.99 to $4.67 (17% increase)
● new product or service design and development

Design → new products, innovations and ideas
Development → implementing and testing ideas
Approaching design and development:
- Responding to consumer preferences
- Changes in technology innovations
A service can be:

1. Explicit - the application of time, expertise, skill & effort.
2. Implicit - the feeling of being looked after.

→ products = create your taste menu, gourmet creations
→ services = children’s birthday party packages, play areas, meeting rooms, free wifi, newspapers
● supply chain management

→ integrating and managing the flow of supplies throughout inputs, transformation and outputs to meet customer
needs
→ factors impacting supply choice: consumer demand, quality of inputs needed, timeliness of supply, cost of
supplier
- global sourcing, e-commerce, logistics

→ global sourcing = businesses purchasing supplies or services without being constrained by location
- Buying supplies from where the suppliers best meet needs (even if its overseas)
→ e-commerce = buying and selling via the internet

- e-procurement = using online systems to manage supply
- B2B = selling from business to supplier
- B2C = selling to a customer online, usually using credit card
→ logistics = refers to distribution, including transportations, storage, warehousing & distribution centres
- Distribution = getting goods/services to the customer
- Storage = a secure place to hold stock until it is required
- Warehousing = the use of a warehouse for the storage, protection and distribution of stock
→ distribution centre: strategically located to minimise time takes to supply stock to retail outlets
→ materials handling: the movement and storage of goods

→ logistics - McDonalds has established, owned and operated distribution centres to ensure reliable supply to its
restaurants
→ eg. Australia uses Australian beef, UK uses British beef
● outsourcing
- advantages & disadvantages
Outsourcing → the use of external providers to perform business activities
Eg. manufacturing, merchandising, logistics
Advantages = simplification, cost savings, efficiency
Disadvantages = communication issues, uncertainty, loss of control

→ outsourcing management IT services and point of sale software
● technology
- leading edge, established
Technology → helps gain competitive advantage by gaining efficiencies to improve operations
- Leading edge = the most advanced technology (helps faster products, reduce waste, efficiency)
- Established = technology that is developed and widespread (eg. barcodes, computers)

→ drink-dispensing machines to improve HR costs and efficiency
● inventory management
- advantages and disadvantages of holding stock, LIFO, FIFO, JIT
→ monitoring and controlling all the stock and when it comes in and when it goes out
Holding stock = just in case stock, held as reserve in case of interruptions or unexpected increase in demand
- Advantages: reduce lead time, shown as an asset on the balance sheet
- Disadvantages: costs of storage, cost if stock never sells
LIFO = last in first out, stock purchased most recently and used first
- Advantages: matching revenue to costs, simple to operate, suitable for when prices are rising
- Disadvantages: inventory valuation does not reflect current prices
FIFO = first stock purchased, the oldest and will be used first
- Advantages: the freshest stock is being sold
- Disadvantages: never shown as an asset
JIT = ensures that the exact amount of inputs will arrive as they are needed
- Advantages: saves money, shrinkage costs
- Disadvantages: allows responsiveness to changes in demand

→ throw out unsold chips after 7 minutes and burgers after 20 minutes
→ using stock control system called manugistics
● quality management
- control, assurance, improvement
→ the degree of excellence of a product/service
Management = processes undertaken to ensure consistency, reliability, safety and fitness
Control = refuses problems and defects in the product by using inspections
Assurance = use of a system to ensure that standards are achieved
Improvement = focus on continuous improvement and total quality management
Total quality management (TQM): managing the entire business to deliver quality to customers
- Commitment and responsibility from employees
- Achieved through benchmarking, employee empowerment, customer focus

→ control: testing sample of outputs to predetermined standards
→ assurance: McDonald’s Supplier Quality Management (SQMS)
● overcoming resistance to change
- financial costs, purchasing new equipment, redundancy payments, retraining, reorganizing plant layout,
inertia
→ changes in the external environment (legislative, regulatory, economic conditions, technological)
→ internal environment = staff & technology
Financial cost → organising change impacting profits, dividends, share profits

Purchasing new equipment → necessary to keep up with technological advancements. Helps to imptorb
flexibility, speed, consistency, quality and reduce waste - financial cost
Redundancy payments → paying workers who are no longer required after a change is made - financial cost
Retraining → on or off the job, gaining new skills (eg. software operation) - is time and cost inefficient
Reorganizing plant layout → is a resistance factor because of the cost or transporting, powering and placing
Inertia → psychological resistance to change (fear of uncertainty)
Kurt Lewin’s freeze/change/unfreeze model

1. Freeze - breaking down the forces supporting existing technology, preparing for change
2. Change - new prodoceedsures communicated and implemented
3. Refreeze - managers offer positive view on changes
John Kotter’s eight-step model

1. Establish sense of necessity 5. Empower people to fulfill vision
2. Form a guiding group 6. Recognise and reward achievements
3. Create a vision 7. Consolidate improvements
4. Communicate vision 8. Institutionalise the changes
● global factors
- global sourcing, economies of scale, scanning and learning, research and development
→ broad reference to coursing business supplies or services without being constrained by location
→ advantages: cost advantage, access to new technologies, access to other resource
→ challenges: possible relocation of aspects of operations, storage and distribution
Economies of scale → cost advantages that can be gained by producing on a larger scale
Scanning and learning → scanning the global environment and learning from the best practices of businesses
around the world
Research and development → helps create leading edge technologies and create innovative product and solutions

→ R&D for McDonalds is a constant process focusing on the external environment
→ they engage with suppliers, customers & franchisees to ensure product satisfy stakeholders
MARKETING

role of marketing
● strategic role of marketing goods and services
→ the process of creating a product then developing and implementing strategies that aim to promote, price and
distribute the product to the market
Profit maximisation → a maximum difference between total revenue coming into the business and total costs

Marketing concept → a business philosophy that states that all sections of a business to satisfy customers
Marketing plan → a document that lists activities aimed at echoing marketing outcomes
● production, selling, marketing approaches

Production approach (1820’s-1920’s)
- Focused on the production of goods and services, ‘if we make it, they will buy it”
- Focused everything into production with no consideration of marketing
Selling approach - stage one (1920’s-1960’s)
- Focused on competition, increasing spending on advertising and sales representatives
Marketing Approach - stage two (1980’s to present)
- Customer oriented, marketing strategies, business plan in order to achieve business goals
● types of markets
– resource, industrial, intermediate, consumer, mass, niche
Market = a group of individuals, organisations or both that need/want products, have the money, are willing to
spend their money, are socially and legally authorised to purchase the product.
Resource Market → consists of those individuals or groups that are engaged in all forms of primary production,
including mining, agriculture, forestry and fishing.
Industrial Market → industries and businesses that purchase products to use in the production of other products
or in their daily operations.
Intermediate Market → consists of wholesalers and retailers who purchased finished products and resell them to
make a profit.
Consumer Market → consists of individuals - this is, members of a household who plan to use or consume the
products they buy.
Mass Market → the seller mass-produces , mass-distributes and mass-promotes one product to all buyers.
Niche Market → also known as a concentrated or micro market, is a narrowly selected target market segment.

→ retailing goods to individual consumers, therefore, a consumer market
influences on marketing
● factors influencing customer choice – psychological, sociocultural, economic, government
→ customer choice = decisions and actions of customers when they search for and purchase goods and services
Physiological influences
- Factors within an individual influencing buying choice
- Perception (view), motives (reasoning for doing something), attitudes (feeling about a product), personality
(characteristics), learning (information) and self-image
Sociocultural influences
- Forces exerted by other people/groups
- Social class, culture and subculture (beliefs), family roles, peer groups
Economic influence
- Economy movement influencing consumer spending, in relation to (un)employment.
Government influence
- Policies directly influencing spending habits
- Eg. Competition and Consumer Act 2010, Sale of Goods Act 1923 (NSW), Fair Trading Act 1987 (NSW)
→ a growing ‘foodie’ mentality has forced McDonalds to offer more healthier options (salads, wraps)
→ legal regulations mean the publishing of calories on foods
● consumer laws
→ in 2011, a single national consumer law was introduced (Australian Consumer Law → ACL)
→ covers: product safety, labelling, market prices, price monitoring, industry codes, mergers & acquisitions
→ breaches of the act result in the ACCC issuing on the spot fines of thousands of dollars
– deceptive and misleading advertising

Bait & switch advertising → advertising a product cheap to entice customers, and when they run out customers
have to buy a more expensive product.
Dishonest advertising → using deceptive words saying that a product has a quality that it does not
– price discrimination
→ setting of different prices in separate markets (eg. different geographical location)
– implied conditions
→ unspoken and unwritten words of a contract
→ eg. the product must be of acceptable quality, match the description, care in delivering service
– warranties
→ designed to offer a degree of protection to the customer if the good is faulty or the service is not carried out with
care.
● ethical – truth, accuracy and good taste in advertising, products that may damage health, engaging in fair
competition, sugging
→ conduct that goes above legal requirements
Truth & accuracy in advertising

→ advertising - a paid, non-personal message communicated through a mass medium
→ advertising should be as truthful as they are held morally responsible
→ shouldn't have: untruths in concealed facts, exaggerated claims (puffery), vague statements
Good taste in advertising

→ what is acceptable and not offensive to people
→ being aware of a younger audience
Products that may damage health

→ federal codes restrict the advertising of junk foods on channels for kids
Engaging in fair competition

→ Competition & Consumer ACt 2010 (prohibits: cartel conduct, misuse of power, exclusive dealing, resale)
Sugging
→ selling under the disguise of a survey (market research)

→ in 2012, McDonalds was found to have breached Spam Act 2003 by sending text messages regarding happy
meal deals, with no opt out option
→ in 2015, they were accused of not good taste in advertising by focusing on the toy in the happy meal rather
than the food itself
marketing process
● situational analysis – SWOT, product life cycle
SWOT
- The identification and analysis of the internal strengths and weaknesses of the business and the
opportunities and threats from the external environment.
- A business must constantly monitor changes, looking for opportunities to exploit and threats to avoid
Product Life Cycle
- Stages that a product passes through: introduction, growth, maturity and decline

→ strengths = goodwill, global brand, market share
→ weaknesses = poor operating performance, protecting intellectual property
→ opportunities = expansion into countries, reinvesting in restaurant, SMA
→ threats = negative publicity, commodity price increase, interruptions to supply chain

● market research
- The process of systematically collecting, recording and analysing information concerning marketing
problems
- 3 step process → 1. Determining information needed, 2. collecting data from primary(eg. surveys) and
secondary (eg. industry reports) sources, 3. Data analysis & interpretation

→ in 2005, asked 2602 people in Australia what they hope to see in McDonalds products
→ found more people wanted healthier options
→ as a result they improved use of vegetable oil, salt reduction, seared chicken
● establishing market objectives

1. Increasing market share → gaining share in the total industry sales for a particular product
2. Expanding the product mix → expanding product range to better understand customers’ needs
3. Maximising customer service → meeting and exceeding the expectations of customers in all aspects
- Can be done through asking customers what they want, anticipating market trends, R&D.

→ 3 pillar approach = 1. Retaining existing customers, 2. Regaining lost customers, 3. Converting casual
customers
● identifying target markets

Target market → a group of present and potential customer to which a business intends to sell its products to
- Customers in target market share certain characteristics
Mass marketing → seeking a large range of customers, developing a single marketing mix, one distribution
channel to reach all customers
Market segmentation → total market is subdivided into groups (demographic, geographic, psychographic)
Nicha market → narrowly selected, needs often neglected by large businesses

→ UK target market = families and busy workers
● developing marketing strategies
Marketing strategies are actions taken to achieve the business’ marketing objectives through the marketing mix.
Product → good or service exchanged for money
- Determining features of the product (quality, packaging, design, brand name & guarantee)
Price → the ‘correct’ price is the amount of money a customer is prepared to offer for a product
- The method that the business uses to price a product
Promotion → methods used by a business to inform, persuade and remind customers about its products
- Forms of advertising, personal selling, relationship marketing, publicity, public relations
Place/Distribution → channels of distribution - getting the product to the customers

→ enhancing digital capabilities to elevate customer experience
→ redefining customer convenience (delivery)
→ creating a more personalised & enjoyable experience
● implementation, monitoring and controlling

Implementation is the process of putting the marketing strategies into operations
Monitoring is the process of measuring actual performance against planned performance & report
Controlling involves the comparison of planned performance against actual performance & make changes

→ mymaccas app used to increase sales as a result of loss of sales between 2015 & 2016
– developing a financial forecast; comparing actual and planned results, revising the marketing strategy
Financial forecast → the business’s predictions about the future
- Measuring the sales potential and revenue forecasts and comparing these with the anticipated expenditures
- Two steps: cost estimate & revenue estimate
Camping actual and planned results:

1. Sales analysis
- Comparison of actual sales with forecast sales to determine effectiveness of marketing strategies
2. Market share analysis
- A businesses ability to evaluate its marketing strategies compared to those of its competitors
3. Marketing profitability analysis
- The business breaks down the total marketing costs into specific activities
Revising the marketing strategy:

- Assessing which objectives are being met and which are not
- Can be revised by: changes in the marketing mix (changing the 4p’s), new product development
(intorudibew new products after 5-10yrs), product deletion (elimination of unsuccessful/outdated products)
marketing strategies
● market segmentation, product/service differentiation and positioning
Market segmentation occurs when the total market is subdivided into groups who share characteristics
- After being segmented, one market is chosen as the target market
- Demographic: age, gender, education, occupation, income, social status
- Geographic: region, urban, suburban, rural, city size, landforms, climate
- Psychographic : lifestyle, personality, motives, socioeconomic group
- Behavioural: purchase occasion, benefits sought, loyalty, usage ate, usage rate, price sensitivity
Product/service differentiation is the process of developing and promoting differences between business’s
products or services and those of its competitors
- Points of differentiation: quality of service, convenience, more features, value of money
Product/Service positioning refers to the technique which marketers try to create an image of identity for a
product compared with the image of its competing product
- Done in relation to the chosen target market
→ demographic = happy meals having toys
→ psychographic = having healthier options
→ geographic = options based on location (eg. Japan has teriyaki mcburger, shrimp fried and chocolate fries)
● products – goods and/or services

– branding
– packaging
Products → goods and services that can be offered in exchange for the purpose satisfying a need or want
- A combination of tangible and intangible components
- Total product concept: the tangible and intangible benefits that a product possesses
Branding → a name, term, symbol or logo that identifies a specific product and distinguishes it from its
competitors.
- Brand name is that part of the product that can spoken
- Powerful marketing tool
- Helps to identify specific product, evaluate product value, gain repeat sales, encourage customer loyalty
Packaging → involves the development of a container and the graphic design for a product
- Preserves the product, protects the product, attracts consumers attention
Labelling → presentation of information on a product or its packaging
- name , description, date mark, country of origin, warnings

→ people are able to recognise the golden arches
→ using package to make claims (‘beef: great taste’ , ‘100% beef’)
● price including pricing methods

– cost, market, competition-based
– pricing strategies – skimming, penetration, loss leaders, price points
– price and quality interaction
Price refers to the amount of money a customer is prepared to pay in exchange for a product.
- Price too high can mean loss of sales, price to low gives a bad quality impression
- Pricing methods are influenced by internal and external factors
Cost-based → derived from the cost of producing or purchasing a product then adding a mark-up
Market-based → setting prices according to the interaction between levels of supply and demand
Competition-based → the price covers costs and is comparable to the competitors price.
- Either below, equal to or above the competitors
Pricing strategies:
Price skimming → charging the highest possible price, during the introduction stage
- Used to recover costs of R&D
Price penetration → charging the lowest possible price
- Used to achieve large market share
Loss leaders → a product sold at or below cost price
- Used to gain customers willing to buy other products as well
Price points → selling products at predetermined prices
Price bundling → buying several products for a comprehensive package
Price & quality interaction → ‘you get what you pay for’ → products of high quality are sold for more due to
higher manufacturing prices

→ ‘loose change menu’ (loss leader) - enticing customers to buy a cheap option as well as a more expensive
→ price bundling with family boxes, value meals
→ price points, higher quality burgers are more expensive
● promotion
– elements of the promotion mix – advertising, personal selling and relationship marketing, sales
promotions, publicity and public relations
– the communication process
– opinion leaders, word of mouth
Promotion is methods used to inform, persuade and remind the target market about its products
- Used to attract new customers, increase brand loyalty, encourage existing customer to return
Advertising: paid, non-personal message through a mass medium
- Mass, direct, telemarketing, e-marketing, social media, billboards
Personal selling: sales representatives directed to a customer in attempt to make a sale
- Can be modified, individualised, after-sales customer service
Relationship marketing: development of long-term and cost-effective relationships with customers
- Aim to create loyalty programs to encourage repeat sales
Sales promotions: the use of activities or materials as direct inducements to customers
- To entice new customers, encourage trial purchases (eg, coupons, refuneds, premiums)
Publicity: free news story about business’s new products
Public Relations: aimed at creating and maintaining favourable relations between business and its customers
- Promoting positive image, effective communication, issues monitoring, crisis management
Communication process
- Used to communicate clearly, efficiently and succinctly to their target markets
- A channel is any method used for carrying a message
Opinion leaders → a person who influences others
Word of mouth → people influencing each other during conversations

→ TV commercials, radio ads, catch phrases
→ relationship marketing - exclusive offers, free wifi, online offer wallet, newsletter with offers and deals
→ publicity by sponsoring sporting event (including the olympics, FIFA, v8 supercars)
● place/distribution
– distribution channels
– channel choice
– intensive, selective, exclusive
– physical distribution issues
– transport, warehousing, inventory
Distribution channels → roots taken to get the product from the factory to the customer, involving intermediaries.
- Procedure to customer
- Producer to retailer to customer
- Producer to wholesaler to retailer to customer (most common)
- Producer to agent to wholesaler to retailer to customer
Channel choice:
- Businesses channel of distribution best suited to the product
Intensive distribution → saturating the market with its products
Selective distribution → using a moderate proportion of all possible outlets
Exclusive distribution → only one retail outlet for a products in a large, geographic location
Physical distribution → activities concerned with the efficient movement of the products from the producer to the
consumer.
- Transport → an intricate network of transportation required to deliver the vast array of products
- Warehousing → a set of activities involved in receiving, storing and dispatching goods
- Inventory → a system that maintains qualities and varieties or products appropriate for the target market

→ using a selective distribution channel
→ partnership with uber eats in 2017
● people, processes and physical evidence
People → quality interaction between the customer and those within the business who will deliver the service
- Perceptions made on how employee treat them
Processes → the flow of activities that a business will follow in its delivery of a service
- To achieve customer satisfaction
Physical Evidence → the environment in which the service will be delivered
- Brochures, signage, calling cards, letterheads, business logo, high quality furniture
● E-marketing
The practice of using the internet to perform marketing strategies
- Web marketing, internet marketing, online marketing
- Used to creator a larger reach
- Web pages, podcasts, SMS, blog, social media advertising
● global marketing
– global branding
– standardisation
– customisation
– global pricing
– competitive positioning
→ adapting marketing plan to suit overseas markets
→ transnational corporation (TNC) - any business that has production facilities in two or more countries and that
operate on a worldwide scale.
Global branding → worldwide use of a name, term, symbol or logo to identify the seller’s product
Standardisation → a global marketing strategy that assumes the way the product is used is the same worldwide
Customisation → global marketing approach that assumes the way the product is used is different between
countries
Global Pricing → how businesses coordinate their pricing policy across different countries
- Customised pricing, market-customised, standard worldwide
Competitive positioning → how a business differentiates its products to maintain a competitive advantage

→ using the same logo worldwide (global branding)
→ offering the famous BigMac worldwide (standardisation)
→ having meals specific to location (customisation)
FINANCE

role of financial management
● strategic role of financial management
→ planning and monitoring the business’s financial resources to enable the business to achieve its financial
objectives
→ setting financial objectives, sourcing finance, preparing budgets, financial statements, maintaining cash flow,
distributing funds
● objectives of financial management

– profitability, growth, efficiency, liquidity, solvency
Profitability → the excess of revenue over expenses
Growth → the ability of the business to increase its size in the longer term
Efficiency → the ability of a business to minimise its costs to manage assets and maximise profits
Liquidity → ability to meet financial commitments in the short-term
Solvency → ability to meet financial obligations in the long-term

Profitability - aims to grow operating margin between 20-40% annually
Growth - aims for 3-5% sales growth annually
Efficiency - aims to reduce administrative expenses by 1%
Liquidity - aims to increase on-hand cash from $12B to $2.5B (USD) from 2016-2017
Solvency - continue returning cash to shareholders
Short term financial objective are the tactical (one or two year) operational plans of the business
Long term financial objective are the strategic plans for the business set for over 5 years
– short-term and long-term interdependence with other key business functions

→ Operations department require funds to purchase inputs and carry out transformation
→ Marketing department requires funds to undertale various forms of promotion
→ HR department requires funds in order to pay staff
influences on financial management

→ business needs funds in order to establish itself and thrive
● internal sources of finance – retained profits
→ funds generated from inside the business
→ retained profits - international finance retained from earnings/profits when not all profits are distributed but kept
in the business as a cheap and accessible source of finance.

→ 2017 annual report shows that the company has $48.3Billion (USD) in retained profits
● external sources of finance

→ funds provided by sources outside of the business
● – debt – short-term borrowing (overdraft, commercial bills, factoring), long-term borrowing (mortgage,
debentures, unsecured notes, leasing)
→ short-term borrowing and long-term borrowing from external sources by a business.
Short term
- Overdraft: one of the most common types, a bank allows a business to overdraw on their account with
minimal costs
- Commercial bills: short-term loans issued by financial institutions, for larger amounts over $100,000 for
30-180 days. They are usually secured against the business’ assets
- Factoring: raising funds by selling accounts receivable

→ McDonalds has available $25Billion (USD) in overdraft
Long term
- Mortgage: secured by the property of the borrower, repaid with interest
- Debentures: issued by a company for a fixed rate for a fixed period.
- Raising funds from investors rather than institutions
- Unsecured notes: loans from investors for a set period of time, not secured against assets with a higher
interest rate
- Leasing: the payment of money for the use of equipment
- Operation leases = short periods
- Financial leases = for the life of the asset

→ McDonalds leases 12,262 stores worldwide, paying around $16Billion (USD) annually
● – equity – ordinary shares (new issues, rights issues, placements, share purchase plans), private equity
→ the finance raised by a company through inviting new owners
- Done through the Australian Securities Exchange (ASX)
Ordinary shares
- Most commonly traded shares in Australia
- Individuals become part-owners of a publicly listed company
- Dividend: distribution of company’s profits to shareholders and is calculated as cents per share
New issue = a security that has been issued and sold for the first time to the public market
Rights issue = the privilege granted to shareholder to buy new shares in the same company
Placements = allotment of shares made directly from the company to investors
Share purchase plans = an offer to existing shareholder in a listed company to buy more shares with no brokerage
fee
Private Equity → money invested in a private company, not listed on the ASX
- Used to raise capital to finance future expansion

→ McDonalds has issued 1,660 million shares
● financial institutions – banks, investment banks, finance companies, superannuation funds, life insurance
companies, unit trusts and the Australian Securities Exchange
Financial institutions collect funds and invest them in financial assets.
→ banks - major operators in financial markets, most important source of funds for businesses
→ investment banks - provides services in both borrowing and lending to the business sector
- Eg. trade in money, provide working capital, arrange project finance, advice on mergers and takeovers
→ finance companies - non-bank financial intermediaries that specialise in commercial finance
- Eg. short term loans, raise money through debentures
→ superannuation - requires all employers to make financial contribution to a fund which provides benefits when
employee retires (federal government scheme)
→ unit trust - mutual funds - funds from smaller investors, invested in financial assets
Australian Securities Exchange (ASX)
- Created by a merger in 2006
- Australian stock exchange & sydney futures exchange
- Offers… shares, futures, warrants, contracts, real estate investment
- Primary & secondary market
● influence of government – Australian Securities and Investments Commission, company taxation
Australian Securities and Investment Commission (ASIC)
- Independent statutory commission accountable to the commonwealth parliament
- Corporations Act 2001
- Aims to reduce fraud and unfair practices
Company Taxation
- Company tax is paid before profits are distributed to shareholders and dividends
- Federal tax system it to improve Australia’s international competitiveness

→ in 2016, Mcdonalds paid AU$109million in tax on AU$374 million in profits
● global market influences – economic outlook, availability of funds, interest rates

Global economic outlook → the projected changes to the level of economic growth throughout the world
- Positive (increase demand, decrease in interest rates) or negative (increase consumer confidence or oil
prices)
Availability of funds → the ease with which a business can access funds on international financial markets
Interest rates → the cost of borrowing money, Australian tends to be above others eg. US or Japan
processes of financial management

● planning and implementing – financial needs, budgets, record systems, financial risks, financial controls
Financial needs → determine where a business is headed and how it will get there, through balance sheet, income
statement, cash flow statement, budgets, banks statements, weekly reports etc.
Budgets → information in quantitative terms about requirements to achieve a particular purpose.
- Operating expenses, project budgets, financial budgets
Record systems → mechanisms employed by a business to ensure that data is recorded and the information
provided by record systems is accurate, reliable, efficient and accessible.
Financial risks → the risk to a business of being unable to cover its financial obligations
- Eg. theft, fraud, damage/loss of assets, errors in record systems
Financial controls → policies and procedures that ensure that the plans of the business will be achieved in the
most efficient way

→ in 2018, McDonalds planned to outlay US$2.5billion in capital expenditure to renovate and open new stores,
recognising financial needs and budgeting for them
– debt and equity financing – advantages and disadvantages of each

Debt finance → short and long term borrowing from external sources
- Advantages: funds readily available, interest payments are tax deductible, flexible payment periods
- Disadvantages: increased fisk, security required, regular payments must be made, interest must be paid
Equity finance → internal sources of finance in the business
- Advantages: does not have to be repaid, cheaper, low gearing, less risk
- Disadvantages: lower profits & lower returns, long and expensive, ownership is diluted

→ due to currency fluctuation risk in 2017, Mcdonalds heald approx. 41.5% of its debts in other currencies (not
USD) - advantage of debt financing
– matching the terms and source of finance to business purpose

→ the terms of finance must be suitable for the purpose of the funds being used
→ financial managers should match the length/term of the loan with the economic lifetime of the asset
→ McDonalds lease most of the land and buildings in which they use, they use a 25 year lease contract matching
the 25 year franchisee lease from the company
● monitoring and controlling – cash flow statement, income statement, balance sheet
Cash flow statement → financial statement which indicates the movement of cash receipts and cash payments
resulting from transactions
- Shows ability to pay debts on time
- Potential shareholders check a business has positive cash flow
- Shows: operating activities, investing activities and financing activities (borrowing activities)
Income statement → summary of the income earned and the expenses incurred over a period of trading
- Record income, record COGS, work out gross profit, calculate net profit
Balance sheet → represents a business’s assets and liabilities at a particular time,
expressed in money terms
- Assets = items of value owned by the business
- Liabilities = claims by people other than wonders against assets, what is owed
by the business
- Owner’s equity = funds contributed by the owner - represents net worth of the business

→ McDonalds compares its ratios with Yum1 Brands Inc (KFC, taco bell)
→ current ratio - Mcdonalds = 1.85:1, Yum! = 1.65:1 (2017)
→ debt to equity ratio - both Mcdonalds and Yum! Have negative equity in 2017 due to buying back stock from
shareholders
→ gross profit ratio - McDonalds = 68%, Yum! = 69%
● financial ratios
– liquidity – current ratio (current assets ÷ current liabilities)
- Goals is to be over 1:1 (eg. 2:1)
– gearing – debt to equity ratio (total liabilities ÷ total equity)
- Goal is to be below 1, meaning they have more equity than debt

- Increase equity (retain more profits, sell shares), decrease debt (sell non-essential assets
– profitability – gross profit ratio (gross profit ÷ sales); net profit ratio (net profit ÷ sales); return on equity
ratio (net profit ÷ total equity)
- Difference between sales and cost

- Goal is to have the highest ratio possible

- Higher the ratio = higher return to owners/shareholders

– efficiency – expense ratio (total expenses ÷ sales), accounts receivable turnover ratio (sales ÷ accounts
receivable)
- Goal is to have the lowest percentage
- Should be less than 30 days

- Shows how long it takes the firm to pay its debts

– comparative ratio analysis – over different time periods, against standards, with similar businesses
Analysis → working the financial information into significant and acceptable forms, making it meaningful
- Vertical = within one financial year
- Horizontal = different financial years
- Trend = 3-5 year period
● limitations of financial reports – normalised earnings, capitalising expenses, valuing assets, timing issues,
debt repayments, notes to the financial statements
→ normalised earnings - earnings that have been adjusted to take into account changes in economic conditions.
- Gives a more accurate depiction of the true earnings, making it easy to compare years.
→ capitalising expenses → a business records as expense as an asset on the balance sheet rather than income
statements
- Understates and overstates the profit of the business
→ valuing assets - estimating the value of assets when recording them on the balance sheet, some assets are also
difficult to value
→ timing issues - expenses incurred by the business on the income statement of the period in which revenue
related is earned (eg. real estate agent earns 2% commission in June but paid in July, cost of commission is in June)
→ debt repayments - financial reports do not show how long the business has to pay debts, methods of recovering
debt, when debts are due
Notes to the financial statement
- Reports the details and additional information that are left out of the main reporting documents
- Information for stakeholders, explain financial statements, accounting methodologies

→ McDonalds have intangible assets such as goodwill which cannot be recorded on financial reports
→ McDonalds uses straight-line depreciation which can impact the statement of assets
● ethical issues related to financial reports

Audited accounts → check of the accuracy of the financial records and accounting procedures
- Used by financial institutions, owners, shareholders and potential investors
- Internal, management or external orders
financial management strategies
● cash flow management
– cash flow statements
– distribution of payments, discounts for early payment, factoring
Cash flow → the movement of cash in and out of a business, if more money is going out then in there is an issue.
- Cash flow statements are used to display the movement of cash, identifying trends
Management: banks allowing the business to overdraw on their accounts
Strategies…
Distribution of payments → distributing payments throughout the month/year, creating more even cash flow
Discounts for early payment → offering debtors a discount for early payments
Factoring → selling accounts receivable for a discounted price
● working capital management

– control of current assets – cash, receivables, inventories
– control of current liabilities – payables, loans, overdrafts
– strategies – leasing, sale and lease back
Working capital management → determining the best mix of current assets and current liabilities to achieve the
objectives of the business
- More efficient = more profitable
- Current ratio shows the working capital of the business
Control of current assets
Cash: critical for the business, ensures that the business can pay its debts. Cash shortages can be avoided through
time planning or purchases and payments
Receivables: sums of money due to the business from customers whom it has supplied foods and services
Inventories: make up a significant portion of current assets, levels must be monitored for too much or too little.
Control of current liabilities
Payables: a business must monitor their accounts payable and censure their timing allows adequate cash resources
Loans: managing short-term loans is important to make sure not too much borrowed
Overdraft: cheap and convenient form of short-term borrowing to cover cash shortage
Strategies
Leasing: a contract between lessor and lessee that lets the lessee rent an asset for a period of time for money
Sale and lease-back: selling an asset and then leasing it back through payments over time
● profitability management
– cost controls – fixed and variable, cost centres, expense minimisation
– revenue controls – marketing objectives
Profitability management → the control of both the business’s cost and its revenues
Cost controls
- Understanding costs before controlling costs & monitoring the levels of costs crucial to the business
Fixed costs: those that are not dependent on the level of operating activity (do not change)
Variable costs: those that vary in direct relationship to the operating activity/production
Cost centres → particular areas, departments or sections of a business to which costs can be directly attributed
- Eg. IT department, HR department, accounting department, maintenance staff
Expensive minimisation → profits can be weakened if the expenses of the business are too high
Revenue controls
- Revenue = the income earned from the main activities of the business
- Determining an acceptable level of revenue in order to maximise profits a business must have clear ideas of
sale objectives, sales mix and pricing
Marketing objectives: marketing strategies should lead to an increase in sales and therefore an increase in revenue,
changes in the sales mix and affect revenues.
Factoring influencing pricing… production, competition, short & long-term goals, government
→ fixed costs = council rates, insurance premiums
→ variable costs = royalty fees payable, foods, drinks, packaging
→ mixed = wages, electricity, water
global financial management

– exchange rates
– interest rates
– methods of international payment – payment in advance, letter of credit, clean payment, bill of exchange
– hedging
– derivatives
Global financial management → strategies that can be adopted to deal with the financial risks and influences on
global businesses.
- Uncontrollable influences include currency fluctuations, interest rates and overseas borrowing.
Exchange rates → when transactions are conducted on a global scale, currencies must be converted to another.
- Foreign exchange market determines the price of one currency relative to another
- Foreign exchange rate is the ratio of one currency to another
- An appreciation of the Australian dollar means imports are cheaper and exports are more expensive,
reducing international competitiveness
Interest rates → the repayment of debts must allow for fluctuations in currency , Australia typically has higher
interest rates, meaning Australian businesses tend to use overseas borrowing.
Methods of international payment
- Payment in advance - allows the exporter to receive the payment and then arrange for the goods too be
sent
- Letter of credit - a document that a buyer can request from their bank that guarantees the payment of goods
will be transferred to the letter
- Clean payment - the exporter ships the goods directly to the importer before payment is received
- Bill of exchange - a document drawn up by the exporter demanding payment from the importer as a
specified time.
Hedging → the process of minimising the risk of currency fluctuations.
- Natural hedging - minimising the risk of foriegn exchange exposure
- Financial instrument hedging - using derivatives which can minimise or spread the risk of exchange rate
fluctuations
Derivatives → simple financial instruments that may be used to lessen the exporting risks associated with currency
fluctuations.
- Forward exchange contract → exchange one currency at an agree exchange rate on a future date
- Option contracts → gives the buyer the right to buy and sell foreign currency at sometime in the future
- Swap controls → an agreement to exchange currency in the market with an agreement to reverse the
transaction in the future (popular for businesses wanting to hedge)

→ Mcdonalds holds $12.4Billion in debt in countries other than the US (42% of its long-term debt)
→ McDondalds uses natural hedging techniques such as: exchange rate contracts, options and currency swaps
HUMAN RESOURCES
role of human resource management

→ the management of the total relationship between an employer and employee in order to achieve the strategic
goals of the business.
- Employer = exercises control over employees, has the responsibility for the payment of wages
- Employee = under the control of an employer (incl. Location, supervision & way work is performed)
● strategic role of human resources

→ businesses need to continually examine ways to improve competitiveness and profitability, an effective
workforce adds value to the business.
→ challenges = developing & retaining staff, improving leadership, managing aging workforce, increased role of
technology

→ they publish a 60-page document named ‘business conduct - the promise of the golden arches’ setting out the
standards and expectations the business has of employees

→ finance… effectively managing the cost of employees
→ operations… better relationships with employees improve performance in operations
→ marketing… strong relationships with customers to build business
● outsourcing
– human resource functions
– using contractors – domestic, global
Outsourcing (contracting) → the use of third-party specialists businesses(eg. Recruiting firms)
- Human resource functions commonly outsourced include: recruitment, induction, training, mediation,
payroll
- Commonly outsourced for review: management, compensation, succession planning, surveys,
benchmarking
Forms of outsourcing
1. Process → most dominant → eg. recruitment, complaints, food preparation
2. Project → found in HR, marketing, design, IT and research

→ Mcdonalds outsources work health and safety requirements to a company called SafetyWorks to ensure all
stores are best equipped to meet legal mandates
key influences
● stakeholders – employers, employees, employer associations, unions, government organisations, society
Stakeholders are any individual or group that has a common interest or is affected by the actions of a business.
- Employers handle HRM on a daily basis, paying wages, managing staff, training
- Employees are critical stakeholders in a business & careful HRM is important to retain them
- Employer associations are organizations that represent and assist employer groups
- They provide advice on matters such as awards, unfair dismissal and dicrimination
- Trade unions are organisations formed by employees in an industry, trade or occupation, coming about in
1904
- Government organisations provide the legal framework for industrial relations
→ eg. SafeWork NSW, Australian Human Rights Commission
- Society is important as it is the stakeholder proving the revenue for the business
→ McDonalds has 1.9million employees, meaning they are a stakeholder in the business and affect HRM
→ 4,000 of their employees are apart of Shop, Distributive & Allied Employees Association (SDA) - the party
which negotiated enterprise agreements for workers Australia wide
● legal – the current legal framework

– the employment contract – common law (rights and obligations of employers and employees), minimum
employment standards, minimum wage rates, awards, enterprise agreements, other employment contracts
→ the employment contract creates obligations for both employer and employee
→ changing community and worker expectations on social justice, safety and environmental issues are reflected in
legislation and work practices.
→ businesses have shifted from a centralised industrial relations system to a decentralised system.
- Centralised: a collectivist approach in which disputes are referred to industrial tribals (eg. Fair Work
Commission, for conciliation/arbitration
- Decentralised: employers and employees negotiate wages and working conditions in the individual
workplace through bargaining.
→ other organisations = fair work ombudsman, safe work australia, comcare, workplace gender equality agency
Employment contract → legally binding formal agreement between employer and employee.
- Every employee has a contract with an employer, most basic workplace relationship
- Key features: duties, supervision, hours, location, promotion policy, discipline policy, bonuses, overtime,
superannuation, benefits, leave, salary
Common law is developed by courts and tribunals

RIGHTS OBLIGATIONS
Employer - Employees carry out work - Provide work

according to award - Payment of income and expenses
- Employees follow WHS
- Notified of leave
Employee - Be paid for time and overtime - Carry out duties beneficial to the
- Receiving allowances business
- Access to leave - Follow procedures
- Give appropriate notice of termination
Minimum employment standards

- Maximum weekly hours of work (38) - Community service leave
- Requests for flexible arrangements (parents) - Long service leave
- Parental leave and related entitlements - Public holidays
- Annual leave - Notice of termination & redundancy pay
- Personal/carer’s leave - Provision of Fair Work statement
Minimum wage rates → an employee’s base rate of pay for the number or ordinary hours that they have worked
- Determined by award, enterprise or national minimum wage
Enterprise agreements → collective agreements made at a workplace level between an employer and a group of
employees about the terms and conditions of employment (must be approved by the Fair Work Commission)
- Single enterprise agreements: between single employee and employees
- Multi-enterprise agreements: two or more employers and employees
- Greenfields agreement: single or multi made before employees can be cover by the agreement are
employed
Other employment contracts

→ independent contractors - known as consultants or freelancers, undertale work for others (most commonly found
in the construction industry)
→ contracts for casual work - employment that is short term, irregular and uncertain; they are not entitled to paid
holidays or sick leave

→McDonalds is reliant on Fair Work Act 2009 to govern their employee/employer relationships (created a
national approach to workplace award and negotiations
– work health and safety and workers compensation

→ Safe Work Australia was established to conduct research and develop national standards, codes of practice and
common approaches to WHS laws
→ workers compensation provides benefits to an employee suffering from an injury or disease relation to their
work
- Paid for loss of wages, medical/rehabilitation

→ The document named ‘business conduct - the promise of the golden arches’ outlines their commitment to
providing a safe work environment, mandating accidents and unsafe practice must be recorded promptly
– antidiscrimination and equal employment opportunity

→ disrcimination = when a policy or a practice disadvantages a person of group of people because of personal
characteristic that is relevant to the performance of the work
- Human Rights and Equal Opportunity Commission Act 1986 (Cwlth)
- Affirmative Action (Equal Employment Opportunity for Women) Act 1986 (Cwlth)
- Sex Discrimination Act 1984 (Cwlth) and the Anti-Discrimination Act 1977 (NSW)
→ Equal Employment Opportunity (EEO) - equitable policies and practices in recruitment, selection, training
and promotion
→ affirmative action refers to measures taken to eliminate direct and indirect disrcimination.
- Employers with over 100 employees are obliged to develop an affirmative action plan

● economic
- The demand for employees is determined by the demand for goods and services
● technological
- Technological change is a major source of improvements in productivity, communication and competition
between businesses

→ they use a system called Metime - an online platform that is used for rostering, training and pay
● social – changing work patterns, living standards

Changing work patterns has meant a growth in part time and casual work because of growth in finance, retail,
hospitality.
- Carer flexibility and job mobility have both increase in recent years (eg. work from home)
- Increased participation for women or elders has also increased in the last three decades
→ Living standards - australians have one of the highest living standards in the world
- Australians strive to have quality jobs which are safe, meaningful, secure and productive
→ they are open 24-hours to meet changing work hours
● ethics and corporate social responsibility

Ethical business practice - practices that are socially responsible, morally right, honourable and fair
Corporate social responsibility (triple bottom line) - the way that business considers the financial, environmental
and social impacts of its decisions
- Code of conduct is a statement of acceptable and unacceptable behaviours in business
- Code of ethics is a statement of a firm’s values and principles

→ has a policy to say that full time students will work no more than two shifts pers week and those below 17
years will not work beyond 11pm or before 5am on a school day
processes of human resource management

● acquisition
→ the process of attracting and recruiting the right staff for the roles in a business
- Recruitment is the process of locating and attracting the right quantity and quality of staff
- Analysing internal (goal and culture, cost) and external environment (economy, legal, social)

→ uses a centralized approach, applicants can submit their details through a central website
● development
→ the enhancing of skills of the employee in line with changing future needs of the business
- Further training, mentoring, coaching
- 1. Induction → introduce a new employee to their job & co-workers
- 2. Training → teach skills, knowledge and attitudes to improve work performance
Mentoring and Coaching

Differences between mentoring & coaching
Mentoring Coaching
Focus Individual life development, Performance enhancement by building skills and

prepared for future roles. capabilities, overcoming weaknesses, resolving specific
issues
Role → facilitator, guide, based on → specific to employee’s work function

sharing advice and experience → assists employee in setting goals and finding solutions
→ personal relationship, more
like a friend
Function Provide advice that may assist Shares skills, knowledge, styles and techniques that are
in improving the way someone relevant to employee needs
manages issues and situations
Time No time frame Specific time frame

frame
Structure Unstructured More structured
Benefits → individual, through → business, through improved teamwork, performance

personal growth, potential and productivity
improvement in performance → may enhance morale
→ may also benefit business
→ enhances morale

→ McDonald's Australia spends AU$40million annually on training
● maintenance
→ processes needed in order to retain staff and manage their wellbeing
→ communication and workplace culture - workplace relationships depend on the strength of the business’s
communication systems
→ employee participation - participation improves communication, empowers employees and develops their
commitment to improving quality and efficiency
→ rewards = flexible arrangements, housing, company car, paid training, health insurance

→ McDonalds Australia holds staff surveys to receive feedback from staff
● separation
→ where an employee leaves a business (voluntary or involuntary)
→ redundancy (retrenchment) - an employee losing their job,where the employee’s job or work no longer needs to
be done

Voluntary Separation Involuntary Separation
- Resignation - Contract expiry

- Relocation - Retrenchment
- Voluntary redundancy - Dismissal
- Retirement
Dismissal = ordering a person to leave (unfair dismissal = being asked to leave for harsh, unreasonable or unjuect
reasons)

→ being in the fast food industry and attracting first job workers, the staff turnover is generally higher
→ 42% for crew and 20% for management
strategies in human resource management

● leadership style
Leadership Style is the way that managers communicate with their employees to inspire and motivate them.
→ Autocratic = quick decisions without input from staff.
- Works well with unskilled or inexperienced workers
- Controls and organises work
- Higher levels of staff turnover
→ Participative/Democratic = a more consultative approach between managers and workers.
- Workers are more engaged
- Gives workers a sense of ownership
- Higher quality output
- Working TOGETHER to achieve goals

→ has a very structured hierarchy, with a crew member all the way up to store manager and consultant
→ each level of staff has precise operational structures, improving efficiency
● job design – general or specific tasks
Job Design is the number, kind and variety of the tasks that a worker is expected to carry out in the course of
performing their job.
Specific tasks → based on specialization and an efficient process that often uses low-skilled, cheap labour.
- Best highlighted in the scientific management approach developed by Fredrick Taylor.
General tasks → a greater variety of tasks to be performed by workers.
- Improves engagement, satisfaction and productivity.
● 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
employment vacancies or anticipated vacancies at the right coast.
- Effective recruitment allows the more appropriate applicant to be selected.
→ Poor selection process leads to increased costs and lower productivity.
Internal recruitment involves filling job vacancies with people from within the business.
Eg. intranet posting, staff records, promotion lists, word of mouth, email.
ADVANTAGES DISADVANTAGES
- Motivates staff - Can reinforce negative culture

- Builds commitment and loyalty - Can lead to rivalry for positions
- Only needs to hire at base level - Need established framework
- They know the business culture - Little value added
- Rewards staff - No new skills added
External recruitment involves filling vacancies with people from outside the business.
Eg. online/newspaper advertisements, trade unions, trade shows, radio, televisions.
ADVANTAGES DISADVANTAGES
- Wider applicant pool - Risk of unknown staff

- New ideas, perspectives and skills - Lost productivity
- Dilutes internal politics - Takes time/effort
- More diversity - Risk of legal claims
General/ Specific Skills

General skills → flexibility, versatility, social confidence, positive attitude, motivation and the ability to work as a
team and/or independently.
- Important to each business in order to undertake different tasks.
Specific skills → help to fill in gaps in businesses, for businesses worried about skill shortages.
Employee poaching is the proactive of enticing employees to work for other businesses.

→ McDonalds recruits crew members and corporate jobs externally through a central system where applicants
are able to fill in an online form
● training and development – current or future skills

Training aims to develop skills, knowledge and attitudes that lead to superior work performance.
- Current skills required by employees
Development refers to enhancing the employee in line with the changing future needs of the organisation.
- Helps maintain competitiveness
- Concerned with the future skills of employees
Insourcing refers to delegating a job to someone within the business as opposed to someone outside the business.
Businesses must consider:
- Further in-house training and development
- Recruiting staff for specific skills
- Retrain experts who retire on a part-time basis
- Retrain women through flexible work structure
- Share stadd
- Outsource functions
● performance management – developmental or administrative

Performance Management addresses both individual and business performance.
→ successful individual performance will often translate into the business’s strategic objectives being met.
Developmental → Improves individual performance through establishing objectives such as reaching sales targets
that are consistent with achieving the organisation’s goals.
Administrative → Assesses the progress of the business in meeting its strategic goals and where necessary
identifying the areas for improvement, such as establishing new goals or employee performance.
DEVELOPMENTAL ADMINISTRATIVE
- Assist with HR planning - Higher productivity

- Overcome weaknesses - Better financial performance
- Highlights effectiveness of processes - Build self-efficacy
- Evaluates rewards and benefits programs - Fosters promotion on merit

→ McDonalds UK employees are subject to biannual performance reviews to assess their progress and set
training and development goals for the future
→ ‘crew member of the month’ a reward for performance which crew members can strive for
● rewards – monetary and non-monetary, individual or group, performance pay

Monetary Rewards are those reflected in pay or have financial value.
Non-monetary Rewards are those that do not have financial value, such as social activities and retirement
planning
Remuneration refers to both the financial and nonfinancial benefits that employees receive in return for their work
effort
Individual or Group reward

→ individual rewards can lead to conflict or rivalry if not managed effectively .
→ gain-sharing plans involve benefits of improvements and success, such as, productivity, cost savings, and sales
increase.
→ team rewards include shares, cash bonuses and annual bonuses.
Performance pay refers to remuneration that is based on distributing rewards according to individual employee
performance.
- Feedback from performance appraisal and management provides many benefits to the business and the
individual.
- An effective rewards system is equitable, clearly communicated, relevant, cost effective, simple to
administer and aligned with business goals

→ up to 50% discount on food (monetary)
→ corporate employees are eligible for a company car, healthcare services and discounted child care (monetary)
● global – costs, skills, supply

→ Globalisation of business, as well as technological developments in the internet, human resource applications
and telecommunications, has significantly increased the competition faced by any business.
→ increasing competition, shareholder demands for higher returns, privatisation, outsourcing and restructuring
have all forced businesses to analyse their strategic direction.
A subsidiary is a company that is owned by another company (referred to as the parent) and it is often located in
another country.
→ used to reduce production costs
→ outsourcing is used to lower labour costs

→ McDonalds offers the opportunity for employees to work in different locations around the word
● workplace disputes
– resolution – negotiation, mediation, grievance procedures, involvement of courts and tribunals
→ conflicts, disagreements or dissatisfaction between individuals and/or groups.
→ strikes refer to situations in which workers withdraw their labour
Resolution → stakeholders resolving disputes include employees, employers, governments, trade unions, courts
- Three processes = negotiated, mediated, arbitrated
Negotiation → a method of resolving disputes when discussions between parties result in compromise and a
formal or informal agreement.
Mediation → the confidential discussion of issues in a non-threatening environment, in the presence of a neutral,
objective third party.
Grievance procedures → formal procedures, generally written into an award or agreement, that state agreed
processes to resolve disputes in the workplace.
Involvement of courts & tribunals:
- The fair work commission has the power to resolve industrial disputes through conciliation or arbitration
→ conciliation is where the decision is owned by the parties whereas arbitration is when the decision is
imposed upon the parties
- Common law action is open to any part involved in or affected by industrial action
→ orders are decisions that require employees or employers to carry out a direction from the tribunal

→ Employees can discuss issues with direct supervisors or the employee can contact the Global Compliance
Office and report and issue with may lead to mediation
effectiveness of human resource management

● indicators
→ Human resource indicators are used by many businesses to evaluate the effectiveness of the business, team or
individual.
– corporate culture
→ The best way to maximise employee productivity and motivation is through a constructive corporate culture,
where employees are trusted, collaborate, have strong personal relationships and are highly trained and mentored.
– benchmarking key variables

→ Benchmarking is a process in which indicators are used to compare business performance between internal
sections of a business or between businesses.
→ Benchmarking may be undertaken using informal benchmarking, performance benchmarking, best practice
benchmarking and balanced scorecard benchmarking.
– changes in staff turnover

→ Staff turnover refers to the separation of employees from an employer, both voluntary and involuntary, through
dismissal or retrenchment.
→ In assessing the significance of turnover, it is important for businesses to benchmark their turnover against that
of other businesses in the industry; and to determine the type of staff leaving and their reasons
– absenteeism
→ Absenteeism is measured as the average rate of employee absences on an average day, without sick leave or
leave approved in advance.
→ High levels of absenteeism and/or lateness may indicate that workers are dissatisfied or that there is conict
within the workplace.
– accidents
→ Around 5.3 per cent of Australia’s 12 million employees experience a work-related injury or illness each year.
→ A low level of accidents, as measured by the Lost Time Injury Frequency Rate (LTIFR), indicate effective
human resource management strategies.
– levels of disputation
→ Employers need to closely monitor both overt and covert manifestations of industrial disputes to evaluate
relationships in the workplace.
→ Employers should be concerned if a number of formal grievances are reported as they are an indicator of poor
quality relationships in the workplace and can be very damaging if they attract media attention or move through the
legal system.
– worker satisfaction
→ Employee satisfaction is a key factor in employee commitment, job performance and staff turnover.
→ Employees who have good relationships with co-workers, enjoy their work activities, receive relevant training
that allows them to do their job well, and gain
opportunities to grow are more likely to be satisfied and stay with the business.
→ Employee satisfaction is improved by matching the purpose of the business with the skills and cultural t of the
employee

→ 83% of employees think it is a great place to work
→ 75% of managers feel favourable about the training they receive
→ in 2014, ranked 11th globally in the AON Hewitt Top COmpanies for Leaders report
→ in 2016, McDonalds UK ranked 2nd by the ‘Great PLace to Work Institute’ in the Best Workplaces list

Business Studies Summary Google Docs

Uploaded by

Copyright:

Available Formats

Business Studies Summary Google Docs

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Business Studies Summary Google Docs

Uploaded by

Copyright:

Available Formats

OPERATIONS

role of operations management

CASE STUDY: McDonald’s

● goods and/or services in different industries

Differentiating Goods Differentiating Services

- Product features - Time spent on a service

● interdependence with other key business functions

CASE STUDY: McDonald’s

CASE STUDY: McDonald’s

Quality → how well designed, made and functionable goods are.

CASE STUDY: McDonald’s

Cost-based Competition → derived from the breakeven point

CASE STUDY: McDonald’s

CASE STUDY: McDonald’s

Environmental Sustainability → business operations shaped around sustainable practices

CASE STUDY: McDonald’s

● corporate social responsibility

● the difference between legal compliance and ethical responsibility

● environmental sustainability and social responsibility

- transformed resources (materials, information, customers)

Information → the knowledge gained from research, investigation and instruction

CASE STUDY: McDonald’s

- transforming resources (human resources, facilities)

Facilities → the plant/office/factory/machinery used in the operations process.

CASE STUDY: McDonald’s

CASE STUDY: McDonald’s

- sequencing and scheduling

CASE STUDY: McDonald’s

- technology, task design and process layout

Task Design = planning the flow of activities

- monitoring, control and improvement

CASE STUDY: McDonald’s

Quality → the quality of a good or service determined by customer expectations

CASE STUDY: McDonald’s

● new product or service design and development

A service can be:

CASE STUDY: McDonald’s

● supply chain management

- global sourcing, e-commerce, logistics

→ e-commerce = buying and selling via the internet

CASE STUDY: McDonald’s

CASE STUDY: McDonald’s

CASE STUDY: McDonald’s

CASE STUDY: McDonald’s

CASE STUDY: McDonald’s

Financial cost → organising change impacting profits, dividends, share profits

Kurt Lewin’s freeze/change/unfreeze model

John Kotter’s eight-step model

2. Form a guiding group 6. Recognise and reward achievements

3. Create a vision 7. Consolidate improvements

4. Communicate vision 8. Institutionalise the changes

CASE STUDY: McDonald’s

● interdependence with other key business functions

● production, selling, marketing approaches

CASE STUDY: McDonald’s

– deceptive and misleading advertising

Truth & accuracy in advertising

Good taste in advertising

Products that may damage health