Business Studies

The process of a business acquiring and combining inputs, and transforming them into outputs as finished G&S

The management of the transformation process

- What to produce?

- How to produce?

- How much to produce?

- For whom to produce?

Focuses on the plans for achieving goals in the long-term

When a business has the lowest cost of operations compared to its competitors, for a given level of quality

Involve the exploitation of the cost savings that occur because of the scale or size of a business

- Economies of scale

- Product standardisation

- Innovation in production methods

- Controlling costs of production

The differences of products, as perceived by customers.

- The physical appearance of the good

- Adequate customer service at minimum cost

- Fast delivery

- Efficient production

- Price

- Competitors copying/improving your strategy

- Perception of a low quality product

- Consumer preferences changing quickly

- Perception of environmental unsustainability

- Tangible

- Can be stored

- Output produced before consumption

- Low customer contact

- Can be transported

- Quality easy to examine

- Less labour-intensive

- Technology: CAD & CAM

- Inputs physically transformed

- Intangible

- Cannot be stored

- Production and consumption simultaneous

- High customer contact

- Cannot be transported

- Quality difficult to examine

- More labour-intensive

- Technology: information & data-based

- Greater people skills required

- Customised production

- Mass production

- Mass customisation

- Globalisation

- Technology

- Quality expectations

- Cost-based competition

- Government policies

- Legal regulation

- Environmental sustainability

- CSR

How a business acquires its inputs

When a business decides to buy its inputs rather than make them

Securing a set exchange rate and therefore price when dealing with purchases involving foreign currencies

Involves the location of different parts of the production process in different geographical areas

- The abundance of raw materials

- Favourable exchange rate movements

- Plentiful labour supply and low wages

- Govt. incentives in foreign countries such as low cost loans, subsidies, low/no tax rates

- Technology, skills, processes not domestically available

- Relatively low transport costs

When a business competes with its rivals by establishing prices for its output based on costs of production

Cost per unit of production

- Developing economies of scale

- Using up-to-date technology

- Controlling production costs

- Controlling costs of R&D

Meeting the needs of the present generation without compromising the ability of future generations to meet their needs

Corporate social responsibility. A commitment by a business to operate ethically and contribute to economic development while improving the quality of life of our workforce and their families, as well as the community at large

- Human rights

- Corruption

- Corporate transparency and honesty

- Labour standards

The activities involved in the transformation of inputs into outputs

Resources which will be changed by the production process (materials, information, customers)

Resources which will cause a change or transformation in operations processes (human resources, facilities)

- Job production (customised)

- Batch production

- Flow production (assembly line)

- Volume

- Variety

- Variation in demand

- Visibility

Deals with only the order in which tasks are performed

The timing (as well as the order) of which tasks are performed

The longest sequence of tasks in the CPA

Critical Path Analysis. A sequencing flow chart allowing businesses to plan all the tasks that must be completed in operations

A horizontal bar graph used for scheduling which provides an overview of the scheduled start and finish of each task in a process

Planning of the manner in which tasks will be completed in operations

Floor plans which arrange equipment into groups by function in the aim to improve efficiency

Where a product moves from station to station in an assembly line

The systematic collection and analysis of information as a task progresses

The collection of numerical information in relation to the operations process

Assessing the performance of a business and making adjustments accordingly

- Feedforward

- Concurrent

- Feedback

Any efforts or activities a business offers that add value to a product

A guarantee that faulty products will be repaired or replaced within a set period under certain conditions of use

- Express (written document stating conditions and time of warranty)

- Implied

The decisions which shape the long-term capabilities of any type of operations

- Quality

- Speed

- Dependability

- Cost

- Customisation

- Flexibility

Speed of response or time taken for a customer to place an order and receive the good or service

Means that a business is able to meet its customers' demands on time

Level of ease with which a business is able to make changes to its operations

- Product flexibility

- Mix flexibility

- Volume flexibility

- Delivery flexibility

A business offering customers a product exactly suites to their needs

- Operating expense ratio

- Cost base

- Break-even analysis

- Fixed

- Semi-fixed

- Variable

- Direct

- Indirect

The complete process of bringing a new product or service to market

- Identifying a market opportunity

- Creating a product that will appeal to that market

- Testing and modifying the product until it is ready for production

The sequence of activities and organisation involved in producing a good or service

Supply chain management. A process to ensure that a business' activities and organisation involved in producing a good or service is efficient and cost effective

- Lead time

- Location of the market

- Outsourcing

- Rationalisation

Involves a business managing the flow of materials, information and other resources between the point of supply and the point of consumption. The co-ordination of the supply chain

Electronic commerce. Business conducted on the internet

- Greater availability of information

- Speed

- Time-saving

- Easier & cheaper access to global markets

- Flexibility

- The ability to create broad networks

- Privacy and security issues

- Increased risk of purchasing faulty materials

Where a business will acquire its inputs across the borders of a number of countries

- Use of overseas expertise

- Inputs needed may not be domestically available

- Favourable exchange rates movements leading to global sourcing being cheaper than local sourcing

- Raw materials and labour being cheaper overseas

- Reduced costs without much investment needed

Where other businesses provide most of the raw materials, components and service inputs

A business expanding its operations to make its own required inputs

- Less capital expenditure than vertical integration

- No need to maintain as many employees

- Contributes to speed of operations

- Flexibility of choice in suppliers

- Less management decisions need to be made

- The business can focus on their core function

- Dependence on suppliers

- Little control over input quality

- Less control over the production process

- Loss of jobs for a business

- Security and confidentiality issues

Technology in the position of greatest advancement in its field

- May not be developed enough for a business' needs

- Bugs

- Problems and costs with technical support

- Develop lucrative markets

- Provide customer service

- Improve production efficiency

Has been used in business situations for a relatively long time, having been tried and proven.

The total stock of goods and materials held by a business

The systems and processes that identify the quantity of goods and materials to be ordered and the timing of their delivery

- Buffer against high demand

- Increased speed and dependability

- Capital gain may occur

- Bulk discounts

- Smooth running of production

- No need to rely on suppliers

- Readily available stock for instant use

- Increased storage costs

- Added management cost and time

- Capital loss can occur

- Perishable goods can go out of date

- Places more levels of management between the customer and the product

- Valuable liquidity is tied up in stock

Last-in-first-out. Keeping up-to-date stock on display

First-in-first-out. Perishable goods being kept in rotation

Just-in-time

- Reduced cost of storage

- Less cash is tied up as stock

- Reduced chance of stock obsolescence

- Less warehouse space allowing room for other activities

Involves planning to develop a policy that focuses on setting performance objectives that clearly set quality as a goal

QC is a feedback control whereby everything involved in production process is reviewed

QA involves monitoring and evaluation of the various processes of a project, service or facility to ensure minimum levels of quality are being achieved by the production process

QI aims to reduce the rate at which mistakes occur in the production process. a.k.a kaizen

The perception that a change will threaten an individual or group within a business and the subsequent lack of willingness to go along with change

- Financial costs

- Inertia of managers and owners

- Cultural incompatibility in mergers and takeovers

- Issues relating to staffing (skills, loss of job prospects)

Unfreeze-change-refreeze

How a business is physically organised

The tendency for things to remain in their existing state

- Remain productive and competitive

- Legal compliance

- Incorporate new technology

- Aid efficiency and customer expectations

- Respond to stakeholder suggestions

- Provide a motivating and challenging workplace

- Increase sales and market share

- Resolve disputes

- Ensure profit and success

The process of acquiring raw materials, services and various parts that are needed to manufacture goods or services

Focuses on the identification of emerging issues and potential pitfalls that affect the organisation's future

The practice of monitoring a business' internal and external environment so that it can gather, analyse and use information

- Ad-hoc (short term, unplanned, infrequent)

- Scheduled

- Continuous

The process of developing a product and implementing a series of strategies aimed at correctly promoting, pricing and distributing the product to a core group of customers

- Choice

- Standard of living

- Employment

- Brand awareness and market share

The percentage of total sales a business has compared with its competitors in a particular market

Assumes that the high quality of the product would ensure its success within the market

Convincing consumers of the need to buy a product

Focuses on the consumer's needs and wants

- Resource markets

- Industrial markets

- Intermediate markets

- Consumer markets

- Mass markets

- Market segment

- Niche markets

- Psychological factors

- Sociocultural factors

- Economic factors

- Government factors

The charging of different prices for identical products amongst different groups of consumers or to different businesses

Represent action taken by businesses to act as responsible corporate citizens within the community

Selling under the guise of research

Current snapshot of up-to-date information and facts currently impacting the business' position

- SWOT analysis

- Consideration of the product life cycle

- Market analysis

- Competitor analysis

The four stages that a product goes through during its lifetime on the market, and its relative level of sales, volume and market share

The collection and analysis of information to identify what the customer wants and to make marketing decisions based on those wants

Gathering original data direct from the customers and target market

Information that has already been researched and published, and can be sourced internally and externally

A specific segment of the total market that the product is aimed at

The way in which a business divides its potential market into different groups

Tactics to meet marketing plan objectives

Putting a plan into action

Set standards for the business to reduce the risk of resource waste and profit loss

A budget of expected revenues and costs over a set period of time

- Geographic

- Demographic

- Psychographic

- Behavioural

Involved the development of a product image (in the mind of a consumer) in relation to other similar products

The development of names and symbols in the form of logos and trademarks for a product or service

The way a product is physically presented to the consumer and has become a highly influential way of affecting consumer choice

- Cost-based

- Market-based

- Competition-based

- Skimming

- Penetration

- Loss leaders

- Price points

Involves setting a high price while demand for the product is high and before competitors enter the market

Setting the price of a new product lower than the prices of competing products, to undersell competing products, gain market share and develop brand loyalty

Product priced well below cost in order to attract customers, to attract customers to buy other products simultaneously

Psychological pricing strategies based on customers' perception of value for their money (e.g. $19.99)

A means of communicating with the market about a product

The combination of promotional techniques used to inform and influence a target market

- Advertising

- Personal selling & relationship marketing

- Sales promotion

- Publicity and PR

Uses media such as television, radio, the internet, newspapers, magazines and billboards to communicate with the public about a product

Involves personal interaction between the salesperson and the customer

Occurs when a long-term arrangement between the business and the customer develops so that there is a satisfying exchange between buyer and seller

- Competitions

- Free gifts

- Displays at the point of purchase

Include free samples, point of sale displays, competitions, discounts, cash refunds, free gifts or two-for-one deals

Concerned with developing a positive public image that is reported by relevant television, radio, print and online media outlets as new items

People such as celebrities, sportspeople and experts in specialised fields, as well as organisations such as Choice (magazine), whose opinions are respected by the community

Occurs when customers who have used a product, communicate their feelings about the product to potential customers.

The link between the producer and the customers of the product

When a manufacturer distributes the product directly to the customer

When distribution occurs through independent intermediaries such as agents, brokers or retailers

Businesses specialising in distribution and are able to get the product to the customer more efficiently than the producer

The product is available in as many places as possible using as many distribution channels as possible

Used when availability of products is limited and the number of distribution channels is limited

Where individual outlets are given exclusive distribution rights

The activities involved in moving the product from the producer to the point of consumption

The storing of products in a secure manner, with ready access so that they can be easily dispatched to retailers in smaller quantities

The way the product and the business appears to the consumer

Marketing conducted on the internet

- One-on-one approach

- Appeal to specific interests

- Niche marketing

- Geo-targeting

A process using a brand name, trademark or logo, to identify a product in a way that will distinguish it in the minds of consumers

The selling of the same product in more than one country

When the product is adjusted through the marketing mix to take into account specific sociocultural, socioeconomic, legal and political influences to make the product more attractive to target markets in specific countries

Involves defining how a business differentiates its product and creates value of its market

Theplanning, organising and controlling of the financial resources of a businessto achieve the goals of the business.

Toprovide the financial resources to allow the implementation of the businessstrategic plan.

- Profitability

- Efficiency

- Growth

- Liquidity

- Solvency

The ability to make afinancial return from business activities.

Theincrease in the size and value of a business over time.

Generatingthe maximum returns for the minimum costs.

The ease with which an asset can be converted into cash.

Theextent to which the current assets of a business exceed its currentliabilities.

- Money for wages

- Bonuses, superannuation and fringe benefits

- Collection of performance data related to sales and productivity

- Costs involved with marketing plans and promotion

- Determining the price of products

- Sales volume and value

- Market share

- Operating income

- Financing of inputs, processes, capital

- Inventories

- Owners' equity

- Retained profits

- Sale of assets

Funds invested into the business by the owners. Money owed to the owners by the business more or less.

The part of net profit that is not paid out in dividends to shareholders, but reinvested into the business.

Surplusassets can be sold and may allow the funding of new projects.

- Debt

- Equity

- Overdrafts

- Commercial bills

- Factoring

- Mortgages

- Debentures

- Unsecured notes

- Leasing

An agreement between the business and its bank that allows the business to overdraw its account by an agreed amount, with interest being charged on the overdrawn amount.

Non-bank bills of exchange that are issued by companies or merchant or investment banks, with the bill itself the indicator of the borrower's debt and the commitment to repay the debt when its due.

Theselling of a company's accounts receivable (money owed to the business) to afinance company at a discount for immediate cash rather than waiting for theturnover period involved.

Loans with a fixed schedule of payments and an asset provided as security (usually property). Security against the loan is necessary in case the borrower cannot meet their repayments (defaults).

Fixed interest securities issued by a company that will pay a fixed interest rate on the money loaned to the company for a set time period; they are used to by large businesses to raise capital.

Loans made by finance companies, referred to as the issuer. The loan is not secured by any assets of the issuing business. Interest payed on unsecured notes is usually higher than a debenture because of the lack of security.

A financial lease is for a set time and payments cover interest and the eventual purchase of the asset. An operational lease differs in that the business will not acquire the asset at the end of the lease.

- Share issues

- Private equity

- Banks

- Investment banks

- Finance companies

- Superannuation funds

- Insurance companies

- Unit trusts

- The ASX

- Financial needs

- Budgets

- Record systems

- Financial risks

- Financial controls

Borrowed funds.

- Interest payments are tax deductible as expenses

- If bankruptcy or solvency occurs, debt providers have priority over equity providers

- Debt can be easy to plan as they normally schedule regular payments of interest

- Will not decrease your ownership in the business

- Often easier to obtain than equity funds

- Repayments begin immediately and must be met regardless of cash flow

- Collateral is often needed

- Personal guarantees may be needed

- Have to have a good credit history for borrowing

- Doesn't have to be paid back

- No repayments, therefore the firm has more cash flow

- Cash flow generated (especially from additional share issues) can be used for further investment and expansion

- Doesn't incur interest charges

- Investors are prepared to wait for some time to get a return on their investment

- You are exchanging ownership of your business

- Proportion of the profits go to the additional new owners

- Does not provide a tax deduction for the business

- New investors often expect improved growth and performance of the business and therefore a better return on their investment

The difference between cash inflows and cash outflows.

A financial report that forecasts the monthly cash inflows and outflows of the business, to help business managers meet their financial obligations during periods or shortages and surpluses.

Outlinesthe level of revenue, cost of goods sold (COGS) and operating expenses, andcalculates whether a business has made a profit or a loss over a period oftime.

(Opening stock + Purchases) − Closing stock

Sales revenue − COGS

Gross profit −Expenses

A statement showing the financial position of a business at a particular point in time, showing short and long-term assets, liabilities and the equity.

- Current assets

- Non-current assets

- Total assets

- Accounts receivable

- Accounts payable

- Current liabilities

- Non-current liabilities

- Total liabilities

- Owners' equity

Short-term assets that can be changed into cash within the year to help pay short-term debt.

E.g. Cash@bank, inventory, accounts receivable.

The amount owed to the business.

Longer term assets used to assist production and used for over a year.

E.g. Buildings, property, equipment, vehicles

Current assets + non current assets

Short-term debts to be repaid within a year.

E.g. Overdrafts, accounts payable

The amount thebusiness owes to other people/firms.

Longer-term debts to be repayed over periods greater than a year.

E.g. Mortgages, bank loans

Current liabilities + non-current liabilities

The investment (capital) contributed by the owners of the business. The capital is owed by the business to the owners.

A=L+OE

Total assets= Total liabilities + Owners′ equity

- Current ratio

- Debt to equity ratio

- Gross profit ratio

- Net profit ratio

- Return on equity

- Expense ratio

- Accounts receivable turnover ratio

- Liquidity

- Current assets/current liabilities

- 2:1

- Gearing

- Total liabilities/Total equity

- 60%

- Profitability

- Gross profit/sales

- 30c to every $1

- Profitability

- Net profit/Sales

- Depends on industry, but around 25%

- Profitability

- Net profit/Total equity

- <20%

- Efficiency

- Expenses/Sales

- Varies

- Efficiency

- Credit sales/Accounts receivable ÷ 365

= Result (in days)

- 14-30 days

- Over different time periods

- Against common standards (industry standards often set by the ATO)

- With similar businesses

- Normalised earnings

- Capitalising expenses

- Valuing assets

- Timing issues

- Debt repayments

- Notes to financial statements

- Audits

- Inappropriate cut off period

- Misuse of funds

- Fictitious revenues

- Cash flow management

- Working capital management

- Profitability management

- Global financial management

- Distribution of payments

- Discounts for early payments

- Factoring

Current assets − current liabilities

current assets/current liabilities

- Cash

- Receivables

- Inventories

- Payables

- Loans

- Overdrafts

- Fixed and variable costs

- Cost centres

- Expense minimisation

- Sales objectives

- Sales mix

- Pricing policy

- Exchange rates

- Interest rates

- Methods of international payment

- Hedging

- Derivatives

The systems that have been developed to manage people within an organisation or business.

To ensure that the productivity of a business is at its fullest potential because the employees are effective and efficient in the way they go about their tasks.

- Most of the employment in any business will be in operations. HR hire operations employees.

- Planning staff needs

- Training and development of employees

- Conflict resolution

- Hiring and training the right people for marketing

- Through the marketing process, a business is able to determine the skills required for employees to produce the desired product

- Finance is often the main source for performance measurement data of employees

- Hiring and training the right people for the Finance department

- Wages, redundancy payments for employees- Fringe benefits

- Costs associated with acquisition and training and development

- Allocating budgets towards the HR cycle

- Access to specialist skills

- Can reduce costs and improve quality

- Reduced lead time

- Allows managers of the business to focus on the core business operations. The focus of the business is on production and attending to the needs of its customers.

- Cost savings are not always achieved

- Employee unrest because of incompatibility working with people from other businesses

- Loss of control over issues such as selection policy

- To fill a temporary position that may only exist for a short period of time

- Because of the cost savings of not having to pay the contractor workers' compensation, holiday pay, superannuation and leave

- Employment ceases when the contract is completed

- Time lags between the need for a contractor and the position being filled because of the screening process

- Not necessarily loyal to the business

- If work specified in the contract isn't performed, problems will arise

- Using a HR business sensitive to local cultural needs • Remaining globally competitive

- Cost advantages that may apply because of exchange rates, price structures and labour standards

- Taking advantage of particular skill expertise

- Stakeholders

- Legal influences inc. current legislation

- Economic influences

- Technology

- Social influences

- Ethics and CSR

- Employers

- Employees

- Employer associations

- Unions

- Government organisations

- Society

Law developed by judges in court, based largely on precedent.

- Pay correct wages

- Cover work-related expenses

- Provide safe working environment

- Forward PAYG tax to the ATO

- Make required super contributions

- Act in a manner that will not affect an employee's reputation, cause mental distress or damage the trust and confidence of the employment relationship

- Follow lawful and reasonable instructions

- Use due care in performance of duties

- Are accountable for all money and property received while employed

- Are faithful to an employer's interests

- Make available any product or process developed while employed

Laws passed by parliaments and take priority over common law.

- Minimum weekly hours of work

- Flexible working arrangements for parents

- Parental leave

- Annual leave

- Compassionate leave

- Community service leave

- Long-service leave

- Paid public holidays

- Four weeks' notice of termination

- Provision of Fair Work information statement

Legally binding orders which define working conditions and set wage rates and other entitlements. Awards cover a whole industry or occupation.

Agreements made at an enterprise level between employers and employees of that business about terms and conditions of employment.

Means that all employees and prospective employees have fair and equal access to jobs, benefits and services provided by an employer.

Occurs when a worker is dismissed from their job and believes that this action is "harsh, unjust and unreasonable".

A commitment by a business to operate ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the community at large.

- Acquisition

- Development

- Maintenance

- Separation

- Induction

- Performance appraisal

- Training

- Development

- Leadership style

- Job design

- Recruitment

- Training and development

- Performance management

- Rewards

- Global strategies

- Resolution of workplace disputes

- Autocratic

- Laissez-faire

- Democratic

- Controlling and rigid in decision-making

- Limited flexibility

- Exerts power through their position

- High level of authority up the chain of command

- Little participation by staff in decisions

- Strict adherence to direct lines of command

- Exercises little control over their group

- May leave team floundering with no direction

- Good for highly motivated team however

- May also improve productivity because of a lack of interference through orders

- Encourages employees and the leader to work together in the decision-making process.

- Employee participation and delegation is key.

- Establishing effective two-way communication systems.

The process of describing and defining the general and specific tasks to be performed by an employee.

- General tasks

- Specific tasks

While training involves educating an employees in the skills and processes of the job they currently hold, development involves educational programs for employees that focus on roles that they may aspire to in future. Hence, training focuses on current skills while development focuses on future skills.

An ongoing process of communication between a supervisor and an employee that occurs throughout the year, in support of accomplishing the strategic objectives of the organization

- Monetary

- Non-monetary

- Individual or group rewards

- Performance pay

- Costs

- Skills

- Supply

- Wage demands

- Working conditions

- Management policy

- Political goals and social issues

- Resolution

- Negotiation

- Mediation

- Grievance procedures

- Conciliation

- Arbitration

- Common law action

- Corporate culture

- Benchmarking key variables

- Changes in staff turnover

- Absenteeism

- Accidents

- Levels of disputation

- Worker satisfaction