syllabus supplement - tqa.tas.gov.au · resources to achieve the objectives of the organisation....

T A S M A N I A N Business Studies C E R T I F I C A T E Senior Secondary O F E D U C A T I O N 2C, 2B, 2A 3C, 3B, 3A 4C, 4B, 4A

Tasmanian Qualifications Authority Date of Publishing: 7 September 2006 Version 2

S Y L L A B U S S U P P L E M E N T The Syllabus Supplement must be read in conjunction with the syllabus document. It contains advice to assist teachers delivering the syllabus and can be modified as required.

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SYLLABUS SUPPLEMENT TABLE OF CONTENTS

SENIOR SECONDARY 2, 3 and 4

EXPANDED SYLLABUS OUTLINE ..................................................................................................................................... 2 Designed to provide ideas and information associated with syllabus content.

EXPLANATION OF CRITERIA........................................................................................................................................... 14

ASSESSMENT INFORMATION......................................................................................................................................... 16 This may include details of work expectations and external assessment requirements.

REFERENCES AND RESOURCES .................................................................................................................................. 17 Useful resources for teachers and students.

TEACHING AND LEARNING ACTIVITIES........................................................................................................................ 20 Suggested activities

EXPANDED SYLLABUS OUTLINE

THIS SYLLABUS FRAMEWORK CONTAINS THREE STRANDS: • BUSINESS MANAGEMENT • PUBLIC RELATIONS • CONSUMER ISSUES

Only one of these three strands should be selected for study.

For Tasmanian Qualifications Authority reporting purposes the strands shall be identified as:

01 - Business Studies (Business Management)

02 - Business Studies (Public Relations)

03 - Business Studies (Consumer Issues)

When advising the Tasmanian Qualifications Authority of student awards, the explicit and appropriate strand name must be reported. For example, for the Tasmanian Qualifications Authority to report an award in ‘Business Studies (Public Relations)’ the strand name must be provided.

For the selected strand, students must complete a negotiated task and selected content from at least 3 of the modules from the same strand. For example, if the strand Business Management is selected, the negotiated task and all modules studies must be from the Business Management strand.

Irrespective of whether a student is studying A, B or C syllabus they shall complete a negotiated task and study at least 3 of the modules from the selected strand. Time allocation and the depth of study dedicated to the negotiated task and each of the modules will reflect the design time for A, B and C syllabuses. For example, a student studying Business Studies (Consumer Issues) B will complete a negotiated task and study at least 3 of the modules from the Consumer Issues strand, but do so within the 100 hours design time. A student studying Business Studies (Consumer Issues) C would similarly complete a negotiated task and study at least 3 of the modules from the Consumer Issues strand, but do so within the 150 hours design time. The depth of study of the negotiated task and modules would be greater for the C syllabus student than the B syllabus student, as the former has an extra 50 hours of study time.

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BUSINESS MANAGEMENT

Business Management provides an introduction to the management of business enterprises in contemporary Australian society from an applied viewpoint. It examines the ways in which people within business manage resources to achieve the objectives of the organisation. It focuses on the acquisition of knowledge and skills that will give students greater understanding and appreciation of the processes of business and of making sound management decisions, involving economic, financial and human resources.

BUSINESS MANAGEMENT STRAND NEGOTIATED TASK This is an opportunity for students to investigate and report on an aspect of the world of business, such as:

1. Preparing a business plan (See Activity 1 for an example task)

This would involve

• perceiving business opportunities

• describing the product or idea and its potential including its prime function; business ownership; location and mission

• explaining how the business would be managed and staffed, how many people and what qualifications and training they will need, and the skills and knowledge that management will need

• analysing the market, including the target market, competition and the marketing strategy used to promote the enterprise

• outlining the financial side of the business and its cash flow projection for the first 12 months, its establishment costs and how they are to be financed, and pricing details

• describing its future prospects, including export potential, of the enterprise

or

2. Conducting an Enterprise

This would involve students in conducting the enterprise outlined in a business plan and be responsible for its operation. (See flowchart, Activity 2.)

or

3. Investigating an Issue

This is an opportunity for students to investigate and report on a contemporary Australian business, management, economic or financial issue and its implications, such as

• the impact of technology on business

• the role of women in Australian business

• the natural environment and business behaviour

• winning international markets and conducting international business

• e-commerce

• management practices in an existing business

• share market phenomena

• business success or failure

• competition in Australian industry

• industrial disputation

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Students would develop a research plan, gather relevant information and then apply their knowledge from at least three of the content areas in this strand so that they can

• describe the issue, process or event

• identify and explain the appropriate concepts and principles involved

• identify and discuss the ethical and moral issues raised by the issue

• draw logical conclusions and discuss the implications for business and society

• outline a set of logical solutions or recommendations to address the issues identified

or

4. Investigating a Small Business

This would involve students in researching a small business and reporting on their findings, such as the

• motivation and personal qualities of the owner

• success and failure factors for the business

• production of the business

• ownership structure

• marketing and location

• financial aspects

• impact of the law

• impact of technology

BUSINESS MANAGEMENT STRAND MODULES

The Australian Business Sector The role and importance of the private enterprise business sector to the Australian economy

• the nature and purpose of business

• the motivations for owning a business – profit, self-employment, tradition, service

• setting up a business – buy, start or franchise

• factors for success – personal qualities of an entrepreneur

• the business as an organisation

• the production process

• key business functions

• the Australian economy

• the private sector

• the contribution of business to employment, production and trade

• the business environment, both internal and external, and the forces acting on business

• the types of businesses – small, medium, large; primary, secondary tertiary

• prime function and mission statements

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Management Styles & Theories 1. The role of management in coordinating the resources of business to achieve its goals

• critical success factors in business

• the enterprising individual

• an introduction to business ethics

• what is ethics?

• responsibilities to stakeholders, such as managing change, social justice, ecological sustainability, compliance with the law and codes of practice

• the concept of management and management models

• management skills

2. Management theories

• the scientific/classical management theory

• behavioural management theories

• quantitative management theories

• system management theories

• contingency theories

• management by objectives (MBO)

• total quality management (TQM)

• the pluralist approach

3. Management styles

• authoritarian/autocratic

• participative/consultative

• laissez faire

Marketing & Distribution • the nature of marketing

• the types of markets (e.g. known and unknown, geographic, niche)

• the importance and types of market research

• the 4 Ps of marketing - product, price, promotion and place

• the nature of ‘product’, lifecycle, packaging and branding

• pricing - its methods and relationship to demand (including break-even analysis)

• promotion and advertising

• distribution systems

• location

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Finance for Business • why businesses need finance – establishment, operation and expansion

• operating a cheque account

• borrowing money – principal, interest, types of financial institutions

• sources of finance – internal (capital contributions, profits); external (overdrafts, trade credit, mortgage, loans, leasing)

• insurance – terms and types (optional and compulsory)

• investing in a business (risk v rate of return)

• the ASX

The Australian Legal System • the structure and functions of courts

• the court hierarchy, civil and criminal jurisdictions

• the structure and function of parliaments as law makers (statute law)

• the legislative process

• dispute resolution

Laws Regulating the Life-cycle of Business Organisations • the legal duties and obligations of business owners, managers and directors

• the concept of corporate citizenship

• laws affecting the ownership of business (sole trader, partnership, limited liability company)

• crime in the business environment

• intellectual property law (copyright, patent and trademark)

• obligations to government (such as taxation, licensing, and OH&S)

Civil Laws Governing Business Behaviour • the law of torts (negligence, nuisance, trespass, defamation)

• the law of contract

The Basics of Business Economics • opportunity cost: the economic problem, opportunity cost and how it applies to business, the

production frontier, e.g. alternative investment opportunities, a business considering expanding, taking in a new partner or taking on a new employee, purchasing a new piece of equipment

• the market: elementary treatment of demand and supply, influences on consumer behaviour and business behaviour, a market case study (e.g. a commodity market, a community market such as Salamanca, the finance market, the labour market, the property/housing market, the share market)

The National Economy • feature of the Australian economy

• the role of government

• the business cycle

• the problems (inflation, unemployment)

• the tools to deal with the problems (monetary policy, fiscal policy)

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Australia and the Global Economy • the issue of globalisation

• the influences on Australian business of exchange rates, commodity prices, and trade agreements

• comparative studies of economic systems with which Australia trades (such as South Korea)

Financial Recording in Business • the reasons for keeping records – owners, managers and government

• the accounting entity concept

• the accounting equation

• recording of transactions in the cash receipts book and the cash payments book

• transaction analysis

• other records, such as petty cash, debtors, creditors, payroll, and stock

Financial Reporting for Business • the preparation of a statement of receipts and payments

• the preparation of simplified bank reconciliation statements

• the preparation of simply classified statements of financial performance in narrative form

• the preparation of simply classified statements of financial position in narrative form

Financial Decision Making in Business • analysis of financial reports: the calculation of profitability ratios (gross profit, net profit, expense

and return on owner’s equity) and solvency ratios (current, quick asset and equity)

• preparation and analysis of budgets, in particular cash budgets

Human Resource Management • factors involved in managing human resources

o the expectations of people working in business: steady employment, a good working environment, opportunities to learn, to be involved, to be challenged

o the employment cycle, including the selection of people, matching jobs and people, induction, training and education, the nature and structure of the employment package, evaluation of employee performance

o assessment of performance of the business, including typical strategies used

• the industrial relations system

o characteristics of industrial relations practices in contemporary Australian business;

o the parties involved in industrial relations

o other factors influencing industrial relations, such as business policies, organisational hierarchy, the nature of the business and management styles

• human resource management (HRM) policy

o how HRM policies are established; how they are reviewed and changed

o how they are communicated

o how they link with identified business outcomes

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• factors influencing change in HRM in Australia

o changes in attitudes of people in the workplace

o changes resulting from new technology

o legislative changes, such as equal opportunity, affirmative action and OH&S

Digital Commerce • the nature of electronic business

• the benefits of electronic business

• the size and impact of electronic business

• the types of electronic business: B2C and B2B

• risks, controls and security issues

• assurance and integrity

• features of a good website

• creating a website

PUBLIC RELATIONS Public Relations aims to develop student understanding of the important and dynamic relationship between organisations and the public, and to improve their ability to communicate in a work-related environment. Students will investigate the public image of existing organisations and then apply these understandings and skills to plan and implement strategies to promote the services and products of real or imagined clients.

PUBLIC RELATIONS STRAND NEGOTIATED TASK

This is an opportunity for students to investigate and report on public relations’ functions, such as:

1. Undertaking a critical analysis of a high profile, local or national individual or organisation and its image

Students could undertake this process after such things as

• researching the history of a high profile individual or organisation to establish the background to its current image

• tracking media presentation of the image of a high profile individual or organisation

• studying a range of case studies

or

2. Undertaking a range of public relations activities either in a real or simulated work environment.

or

3. Developing a project brief for a major public relations project or event on behalf of a client (real or imagined)

Students would develop a research plan, gather relevant information and then apply their knowledge from at least three of the content areas in this strand so that they can

• identify, explain and prioritise the public relations issues for the enterprise concerned

• identify the image that needs to be conveyed

• identify the type of audience that needs to be targeted

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• identify and discuss the ethical and legal issues

• produce a detailed and comprehensive plan of their proposed PR activity, including client description, rationale, objectives, strategies, media selection, target audiences, costing and evaluation

or

4. Undertaking a marketing exercise to promote a college/business

Students, either alone or as a group, and in consultation with appropriate individuals, plan and conduct a marketing exercise in promoting the image of their school or college or of a local business. This could require investigating the concept of a positive image, who the target or public is, what potential exists for positive image building, the costs and benefits associated with a sustained effort at positive image building, and what communication skills would be required. It could, for example, lead to the production of a web page for the organisation

PUBLIC RELATIONS STRAND MODULES

Communication • the function of communication in presenting, maintaining and changing a public image

(businesses/individuals/organisations)

• the barriers to effective communication

• the use of various types of communication (written, oral, symbolic, official, unofficial, informal)

• the impact of information technology on communication

The Marketing Process • the nature of marketing

• the types of markets (e.g. known and unknown, geographic, niche)

• the importance and types of market research

• the ‘4 P’s’ of marketing - product, price, promotion and place

• the nature of ‘product’

• pricing - its methods and relationship to demand (including break-even analysis)

• promotion and advertising

• distribution systems

• location

• research techniques

Public Relations • the legal aspects of public relations

• ethical aspects of public relations

• the background to public relations and the arenas in which it operates in Australia

• public relations as a form of communication and its relationship to marketing

• public relations techniques (including research)

• management activities related to public relations

• the importance of ‘image’ - creating, maintaining, changing

• barriers to successful public relations

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Working with Mass Media • what is the mass media?

• its role in Australian society

• its role and importance to the public relations function

• creating messages in a variety of media formats

Administration • information communication technology skills

• organisational skills including time management, commitment to task completion, reliability, ability to meet deadlines, planning and follow up, attention to detail and the ability to undertake a number of tasks simultaneously

• management skills including the ability to organise and carry out planned activities, delegate and organise team members, convene meetings and goal setting

• leadership skills including initiating activities, creativity, providing direction to others, demonstrating entrepreneurial flair and working without supervision

• group skills including problem solving, active listening, negotiation and personnel management skills

• the selection, training, management and evaluation of employee performance

Budgeting for Public Relations Strategies • esablishment costs

• sales budgets

• expense or cost budgets

• cash budgets

CONSUMER ISSUES Consumer Issues is designed to give students greater confidence to engage effectively in modern society as a consumer from an applied viewpoint. It is designed to help them make the best use of their income and to develop knowledge and skills that will enable them to more confidently and effectively manage their own finances. The world is an increasingly complex one, with everyday things like earning a living, obtaining credit, and getting a roof over your head becoming increasingly complicated. Simple things like shopping or doing banking are becoming a maze for which there are many traps for the uninformed.

CONSUMER ISSUES STRAND NEGOTIATED TASK This is an opportunity for students to investigate and report on the purchase of an item that relates to their current and future roles as consumers, such as

• buying any other major consumer durable (such as a home theatre system, computer or family fridge)

• getting health care

• examining the advantages and disadvantages of various credit cards

• analysing sales promotion techniques

• organising a trip

…the suggested topics list continues, with detailed descriptors, over the following page

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• buying a motor car

Buying a car is probably the first big purchase a person makes. It is one of the most expensive purchases for most people during their lives, second only to the purchase of a home. The purchase of a car is usually a much anticipated and exciting time. However, there are a number of important factors that students need to consider before they finally settle on a vehicle and because cars are expensive items any mistakes that they make could prove costly. In this negotiated task, students would need to investigate and report on

how to choose the right type of car for them

different ways to buy a car

what to look out for

costs of acquiring and running a car

• buying or renting a home

This negotiated task is concerned with how to rent or buy a flat or house. Students have the choice of investigating either of two options:

Renting/Leasing a flat or house. Moving out of home is a pretty big deal! It could be the best thing a student ever did or it could turn out to be costly and emotional nightmare. They will need to plan their move well. This study will require them to research all the costs not just the rent e.g. the bond, bills, furniture, cookware, bedding etc. Living alone or sharing can be a pretty costly business and they need to work out whether they have enough income coming in to afford all of this.

Buying a house. Buying a house is by far the biggest purchase that most people make, so it’s important to know as much about the process that students can. It is a complex business and they will need to think about a lot of things. Every decision counts. If they make a bad decision then it could cost them dearly. They need to take the time to study the market by taking y their time to look around at the prices being asked for houses in the area they are looking in. They also need to take the time to shop around for finance (their housing loan will probably be the most money they will ever borrow in their life and it will be a loan that will probably take 20-30 years to pay off) There are a lot of different types of home loans available from a range of lending institutions such as banks. Different types of loans will suit different people and they will need to decide what’s right for them. In addition there can be a lot of associated costs with the loan, so what might appear on the surface to be a good deal might not look so good when all the additional fees and charges are taken into account.

For either choice students would investigate

• what is involved in renting or buying

• the legal aspects involved in renting or buying

• the financial aspects involved in renting or buying

• aspects you need to consider when sharing a flat or house

• choosing a mobile phone plan

Mobile phones have become very popular with Australians. A recent survey found that 43% of all households had one or more mobile phones. Another survey found that more than 50% of teenagers between the ages of 14 and 17 own a mobile phone. At the same time as usage has grown there has been an alarming number of 18-25 year olds who are filing for bankruptcy over mobile phone bills. Many young people are entering into contracts for mobile phones without fully understanding what they are getting themselves into.

In Australia the mobile phone industry is constantly changing and highly competitive. Phone companies use aggressive advertising, advances in technology and innovative packaging to increase their share of the market. As a consequence it’s important that consumers be informed about the market and be able to compare services and products. Mobile phones are not cheap items and there really isn’t any real point in having one if they don’t really need one. The money could probably be better spent elsewhere.

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There are many things that students need to consider and understand before they sign up for a mobile phone. The first question they should ask themselves is ‘Do they really need one?’ In order to do this they need to consider carefully the reasons why they think you need or want one, such as

• they want to be able to contact people at any time

• they need to get picked up from sports practice or their part-time job?

• all their friends have one and they want one too?

• they might need to call home for safety?

• they like the games and gadgets that come with the phone?

• it is easier to change arrangements with your friends

General guidelines for Consumer Issues Strand Negotiated Task: Students would develop a research plan, gather relevant information and then apply their knowledge from at least three of the content areas in this strand so that they can

• describe the item

• identify and explain their choices

• understand the informative and persuasive techniques being used to influence their decision

• outline thoroughly price comparisons; warranty comparisons; financing options etc from different sellers/providers

• research widely, especially using consumer information sources (such as Choice)

• make a logical choice in terms of their needs and income

CONSUMER ISSUES STRAND MODULES

Earning & Paying Tax • job/career planning

• industrial issues: awards, enterprise agreements etc

• other ways of earning an income, e.g. a business of your own, benefits

• tax: PAYG, GST and CGT

• completing a tax return

• types of business: small, franchise, partnership, company

• types of social welfare benefit

Budgeting & Saving • monitoring spending

• goal setting and a savings plan

• budgeting and thrift

• preparing a budget

Smart Shopping • wise buying

• consumer rights and obligations

• internet shopping

• avoiding buying pitfalls

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Banking, Borrowing & Insurance • Banking

o types of financial institutions

o types of account

o direct deposit

• Borrowing

o sources of finance: plastic, loans, retail plans

o obtaining a loan

o tips for better borrowing

o obtaining and using credit cards

• Insurance

o why people need it

o types of insurance

Looking after Yourself • consumer protection

• rights and responsibility at law

• voting

• workplace issues

• health and lifestyle

• community participation

Leisure Time • using your time

• choosing options

• community facilities

Living Independently • moving from home

• arranging accommodation

• managing household finances

• major purchases

• lifestyle issues

Personal Investing • options: shares; property; managed funds & superannuation planning

• risk profile/management

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EXPLANATION OF CRITERIA

CRITERION 1 COLLECT AND CATEGORISE INFORMATION This TCE generic criterion focuses on the development of students’ investigative skills. Students will gather relevant information from different sources, examine the information and organise it into different categories.

CRITERION 2 COMMUNICATE IDEAS AND INFORMATION This TCE generic criterion focuses on the development of students’ ability to communicate effectively in spoken and written forms.

CRITERION 3 PLAN, ORGANISE AND COMPLETE ACTIVITIES This TCE generic criterion focuses on the development of students’ ability to plan, organise, complete and reflect upon activities. Students will be expected to plan and set goals, design strategies to undertake and complete tasks effectively, achieve goals and evaluate the effectiveness of their planning procedures.

CRITERION 4 ASSESS EVIDENCE TO DEVELOP INFORMED OPINIONS This criterion focuses on a student’s ability to determine, using a variety of techniques, what certain information tells us. They may need to show initiative in seeking and gathering information where required to form a broader picture; to demonstrate an appreciation of alternative perspectives.

CRITERION 5 APPLY FINANCIAL TECHNIQUES AND PROCESSES This criterion focuses on students’ ability to perform mathematical calculations and present appropriate financial records and reports. These include:

Types of calculations – formulae, ratios, percentages, proportions, other indicators of performance, accounting equation, cost calculations, quotations

Types of formats – spreadsheets, charts, graphs, tables, financial statements, surveys

Types of records and reports – statement of financial performance, statement of financial position, personal budgets, cash records, stock cards, non current asset registers, event/function/program budgets

Basic calculations – given data with simple mathematical manipulation; complex calculations – given data with sophisticated mathematical manipulation and/or presentation, such as in classified and narrative style

CRITERION 6 DEMONSTRATE KNOWLEDGE AND UNDERSTANDING OF TERMS, CONCEPTS AND IDEAS

This criterion focuses on students’ ability to demonstrate knowledge and understanding of terms, concepts and ideas relevant to modules of the strand being studied. The differentiations noted in the descriptors for this criterion regarding types of terms may be understood as follows:

Simple terms – profit, business, seller, money, asset, advertising, needs, wants, budget, public, marketing, media, advertising, communicate, savings, choice risk

Key terms – promotion, retailer, wholesaler, current assets, product, position, price, promotion, industrial issues

Complex terms – monetary policy, non current assets, liquidity, common law, opportunity cost, market research, ethics, contract, copyright, dynamics of marketing, superannuation planning

CRITERION 7 WORK CONSTRUCTIVELY WITH OTHERS This TCE generic criterion focuses on the development of students’ ability to work collaboratively and constructively in a range of structured and unstructured situations.

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CRITERION 8 ANALYSE AND EVALUATE ISSUES AND INFORMATION The SOSE generic criterion focuses on students being able to organise and structure information based around an issue. Students should also compare, discriminate between and assess the value of ideas, data and evidence.

CRITERION 9 DEMONSTRATE UNDERSTANDING OF CURRENT ISSUES This criterion focuses on a student’s ability to show knowledge and understanding of contemporary issues, provided through the media, simulations or case studies. Students need to be able to:

describe the issue make the links to and use the terms, concepts and ideas being studied identify the stakeholders involved and their points of view discuss the moral or ethical issues involved outline the effects on sectors of the community pose solutions and recommendations

CRITERION 10 IDENTIFY PROBLEMS AND MAKE RECOMMENDATIONS This criterion focuses ability to assess a situation from the information given, use strategies or tools to identify the nature of any problem(s), and to make appropriate recommendations.

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ASSESSMENT INFORMATION

It is recommended that a broad range of teaching and learning tools are employed. These include:

Knowledge of current events

Newspapers, magazines, news broadcasts and other current events coverage are will be valuable sources of information. They will help you and your students make the important connection between the theory and the real world.

Discussion of the ethical issues involved

Business ethics is about how we expect businesses to conduct their affairs in the context of the expectations and requirements of society. It concerns the socially accepted standards of right attitudes and conduct concerning the way businesses treat other businesses, individuals, society, other species, the environment, and government. It involves discussing moral values that apply or should apply in a given situation, whether they are the most appropriate moral values, and how conflicts should be resolved.

Direct contact with business

This involves students in businesses or with business people, such as managers, owners or employees, and is designed to strengthen their theoretical understandings. Students should assist with planning the activity, take notes during the activity, participate in subsequent class discussion, and prepare a draft and final reports. These contacts can take a variety of formats, eg interviews, excursions, work experience, work observation, mentoring, job shadowing, written correspondence, contact through e-mail, guest speakers etc.

The use of information technology

This involves students using a variety of current information technologies to access and present information. These could include the use of a word processor to record, arrange and present information, the use and design of a spreadsheet and database, the use of e-mail and the world wide web, and the use of presentation technologies such as PowerPoint for class presentations.

The use of practical activities or exercises

This involves students undertaking a practical activity related to the topic being studied. It involves them planning and conducting the activity.

The use of case studies and hypotheticals

This involves students studying a real or hypothetical business or business situation, responding to structured questions by identifying the critical elements and analysing the information presented, and then presenting appropriate oral or structured written responses. Case studies can be obtained from relevant textbooks but you should feel free to devise your own. (See Activity 3.)

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REFERENCES AND RESOURCES Business Management Strand

Books

O’Neill, Bridges, Byrnes, Hooper & Sgambellone, Business Management Units 1 & 2, Nelson ITP

O’Neill, Bridges, Byrnes, Hooper & Sgambellone, Business Management Units 3 & 4, Nelson ITP

O’Neill, Bridges, Byrnes, Hooper & Sgambellone, Business Management, VCE Teacher’s Resource Book, Units 1-4, Nelson ITP

Alger, Delahunty & Diamantopoulos, VCE Business Management, Book 1, Oxford University Press

Alger, Delahunty & Diamantopoulos, VCE Business Management, Book 2, Oxford University Press

Chapman, Douglas, Harper, Merritt, & Norris, Business Studies in Action, HSC Course, Jacaranda

Drinan & Cater, Small Business Management & Communication, Edward Arnold

Drinan & Cater, Human Resource & Corporate Management, Edward Arnold

Barrile, Management in Action, VCTA

Miles, Business Management, Case Studies, Edward Arnold

Cameron, Management Hypotheticals, VCTA

Greene & Watson, Inside Business, Heinemann

Cronk, Kirkwood, Ryan & Stanley, Financial Management, Nelson ITP

Cronk, Kirkwood, Ryan & Stanley, Marketing Management, Nelson ITP

Cronk, Kirkwood, Ryan & Stanley, Business Organisations & Their Environments, Nelson ITP

Cronk, Kirkwood, Ryan & Stanley, Introduction to Management & Entrepreneurship, Nelson ITP

Barrile, Bini, Taylor, Wharton, Business Management Book, VCE Units 1 & 2, Macmillan

Lesson Plans

Pearce & Walker, Instant Lessons in Business Studies, Book 1, Emerald City Books



Rob Steer, Enterprise in Action, Small Business Case Studies (Photocopiable Masters), Copytopics, 28 Roseland Grove, Doncaster, Victoria 3018

Rob Steer, Single Entry Exercise Pack, Copytopics, 28 Roseland Grove, Doncaster, Victoria 3018

Magazines

Business Studies Review, Tim Riley Publications, PO Box 455, Dee Why, NSW 2099

City Ethics, Newsletter of The St James Ethics Centre, GPO Box 3599, Sydney, NSW 2001

Compak, The journal of the VCTA, [email protected]

Games

ASX Sharemarket Game

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Videos/DVDs

Trade Resources 2005, Austrade

Kits

Ethics/enterprise - a life cycle of a business produced by the Independent Commission Against Corruption in NSW

Think Like an Entrepreneur, National Curriculum Services

Miranda Baptist, Case Study: South Korea, Power point

Websites

www.afssse.asn.au/beat/index.htm

www.bized.ac.uk

www.austrade.gov.au

www.asx.com.au

www.abs.gov.au

www.quicken.com.au

Public Relations Strand

Books

Yavuerbaum E, 2001, PR for Dummies, Wiley Publishing, New York

Stracey M, 2004, Advertising, Heinemann Harcourt Education, Melbourne

Moi Ali, 2001, Marketing Effectively, Dorling Kindersley, London

Moi Ali, 2001, Effective Public Relations, Dorling Kindersley, London

Moi Ali, 2001, Making Presentations, Dorling Kindersley, London

Belch G and Belch M, 1995, Introduction to Advertising and Promotion, Irwin, Chicago

Johnston and Zawawi (eds), 2000, Public Relations Theory and Practice, Allen and Unwin, NSW

Chung Kay, 1999, Going Public, Hale and Iremonger, Alexandria NSW

Miles S, 1993, Business Management, Edward Arnold, Melbourne

Tymson and Sherman, 1996, The New Australian and New Zealand Public Relations Manual, Tymson Communications, Chatswood NSW

Seital F.P. 2001, The Practice of Public Relations, Prentice Hall, New Jersey

Frangi and Fletcher, So You Want Media Coverage, University of Queensland Press, St Lucia

Dunphey Kirstey, 2005, Advance to Go – Collect $1 Million, Speaker Direct, Carlton Victoria

Seiteel Fraser, The Practice of Public Relations, Pearson Prentice Hall, New Jersey, 2004

Foster John, Effective Writing Skills for Public Relations, Kogan Page, London, 2004

Cutlip, Centre, Broom, Effective Public Relations, Prentice Hall, New Jersey 2000

Wilcox D, Public Relations Writing Media Techniques, Pearson, Boston, 2005

Saunders D, 20th Century Advertising, Carlton, London 1999

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Lesson Plans

Magazines

Videos/DVDs

Introducing Public Relations, VEA, Bendigo

Series: Branded: Levi’s Blue Dreams, Learning Essentials, BBC

Got a Minute? The Procedures, Principles and Practice of Meetings. VEA, Bendigo

Kits

Websites

Consumer Issues Strand

Lesson Plans

Operation Financial Literacy, Teachers Notes and Student Worksheets Modules 1 - 9, available from Financial Basics Foundation, www.financialbasics.org.au

• www.dollarsandsense.com.au • FPA student guide • Games e.g. ASX Sharemarket Game, Megabucks • Accounting software (e.g. Cashbooks) • www.myfuture.edu.au • job guide • competitions: ABW, Young Achievers, Plan Your Own Enterprise… • uni text ‘Personal Investment’ • Money Stuff! A resource for the Teaching and Learning of Commerce (Consumer Affairs Victoria,

2003) www.moneystuff.net.au

Videos/DVDs

Kits

Websites

• www.asic.gov.au • www.iecltd.com.au • www.fpa.asn.au • www.asx.com.au/investor/education/teacher resources/index.htm

T A S M A N I A N Business Studies C E R T I F I C A T E Senior Secondary O F E D U C A T I O N 2C, 2B, 2A 3C, 3B, 3A 4C, 4B, 4A


T E A C H I N G & L E A R N I N G A C T I V I T I E S These are learning tasks and teaching suggestions provided by classroom teachers. Teachers are invited to use and adapt these to suit the needs and interests of their learners. The contribution of teachers who provided these examples is gratefully acknowledged.

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ACTIVITY 1 - PREPARING A BUSINESS PLAN EXAMPLE TASK

This task is student directed. A guide is provided for students to help them complete the work for assessment, which may be completed individually or as a group.

Work Requirements

Students will be expected to complete a business plan for an original business idea or venture of their own. Their idea may be for either a new product or service or an existing product or service they already market but wish to develop further.

Student Guide

Your plan must be word processed in not less than 10 point, of no more than five A4 pages or 2000 words in length. Appendices are permitted but not be more than five A4 pages. This makes a total of 10 pages.

St ep 1 : Outline the Idea

In this section you will write a summary of just what your idea is. It should be a very clear or succinct description of your product or service, what its good points are, what its potential is and why it is the right opportunity for you. It should be about 250 words. Your heading should be THE IDEA & ITS POTENTIAL.

Here are some further suggestions to be included:

1. A precise comment on why you want to run the business

Is it because you think -

• it capitalises on trends in the market place? • it will make a lot of money and be very profitable? (why?) • it is not risky, ie a 'safe' business? • it is in something you like doing? • it is something associated with what you already do as a hobby? • it is something associated with what you are good at? • it is a challenge? • it is something new in the market? • it is a growing industry? (how do you know?)

2. A well reasoned list if its good points

Is the opportunity -

• cost efficient to establish? • possible to operate as an internet or e-commerce opportunity ? • well oriented to the export market? • unique in the market-place? • compete vigorously against other businesses doing similar things?

3. A mission statement 4. A SWOT Analysis

These web sites may be useful: www.business.gov.au

www.bep.gov.au

www.myfuture.edu.au

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Step 2 : Comp let e t he Mark et Analysi s

This section is about marketing, of finding out what your customers need and then bringing together your market research, product design, packaging, pricing, distribution, selling, promotion and advertising into one coherent strategy.

Under the heading MARKET ANALYSIS you must provide detail of your marketing plan, such as

• How you analyzed your market (your market research) • The marketing environment in which you operate (e.g. the economic environment, the legal and

political environment, and the ethical environment) • The elements of your marketing plan - situational analysis, marketing objectives, identification of

target markets, developing the marketing strategies, implementation, evaluation

In particular, this includes:

1. Your potential buyers or target market • who exactly they are (eg, males, females, both, children, teenagers, young adults (<25), young

marrieds, middle age, old people, ordinary working people, professionals, busy people, business people, low or middle or high income, overseas)

• what they buy now • what prices they are willing to pay • why they buy, where they buy and why they buy from there • what they like or dislike about what they buy • what changes would be acceptable • how much or how often will or do they buy (daily, weekly, monthly, every now and then) • how do they buy • what different groups or segments may be interested in your product or service • how you might collect some of this information, eg observation, questionnaire, survey,

professional help, government departments, Australian Bureau of Statistics, etc)

Be very clear about them - learn everything you can - answer the questions what, who, why, where, when and how. Basically there are two types of market research: desk research through published statistics from government departments and trade associations a lot of which can be found in libraries, on the net or in magazines; and field research through surveys, questionnaires, panels or reaction groups.

2. Your competitors • who they are • what they do • what prices they charge • what they are good at • what they are not so good at • why your product or service is better or different (ie what distinguishes your product/service

from your’s) • why people buy from them

a) do they give any extras b) what can you learn from them (eg, location, stock, layout, promotion etc)

3. Your marketing strategy • Your marketing mix (the 4 P's: product, place, promotion, price) to get to your customers or

customer segment. This includes your a) Products and services – the total product, the product mix, product life cycle,

product modification, branding, packaging

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b) Promotion – the promotion mix, methods of promotion, developing an advertising campaign, visual merchandising, sponsorship

c) Place – distribution channels, location, layout, the digital world d) Price – price setting methods, pricing strategies (penetration pricing, market

skimming, competitive pricing, psychological pricing, discount pricing) • Its relationship to your business goals and objectives – increasing market share, increasing the

product range, broader geographical representation, maximizing customer service, loyalty and repeat custom, strategic alliances etc

• Your market segments – demographic, geographic, psychographic, behavioristic • This will include consideration of such things as follows. Some are also explained in further

details. a) the image or impression you are trying to create, how you will develop your

business's image, and the medium or message you will use b) what appeal you are making to your customers (eg, quality, price, both) c) will you have a launch and what form will it take d) the approximate cost and style of advertising and promotion (eg, matchboxes; pens;

through the media, such as magazine, radio, television, cinema; by handbills or letter box drop), when and how often

e) your most effective merchandising technique(s) f) your pricing strategy, i.e. the price you will charge your target market and why (this

will need to be cross-referenced to the section in Step 4) g) what sort of promotion of the business's image is desirable (e.g. press release,

exhibitions and trade fairs, clean attractive shop, signs and logo, friendly/helpful staff)

h) what packaging do you require and what it will look like (a colour copy of the packaging would be advantageous)

i) what business or brand name will you choose (remember it must be linked to your marketing strategy)

j) the hours and days of trading k) the degree of self-service l) whether credit is available, to whom, what types and how outstanding monies are

collected m) whether delivery is available and at what cost n) whether goods can be returned for cash and/or exchange and your product

guarantees

4. Your location as a traditional business • how will your location attract your target market • do your customers come from areas other than the surrounding areas • your business's address, together with a map • positive attributes about the ‘site’ and access (eg, how easy it is for passers-by to see it, it's on the

sunny side, it is easy for people to stop and park, it's on a major thoroughfare; other facilities may include closeness to public transport, banks, the post office, suppliers, supportive or complementary businesses; and servicing by utilities)

• specific Council regulations

You may find it an advantage to talk to a real estate agent, do a traffic or pedestrian count at various times of the day, and investigate the street signs in the area.

5. Your digital enterprise

You will need to demonstrate your understanding of the use of e-commerce and what its implications are for your opportunity. You will need to consider

• How you will draw people to your site • How you will manage the issue of trust • How you will manage the distribution of your product

These web sites may be useful: www.e-businessguide.gov.au

www.govonline.gov.au/projects/ebusiness

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Step 3 : Cov er th e Leg al Asp ec t s

In this section you must describe how you will fulfil the legal requirements of establishing your own business. Use the heading LEGAL Aspects and should include information about

1. Your legal structure • the type of business organisation you have chosen to operate, eg sole trader, partnership or private

company • its particular characteristics • the advantages it enjoys over the alternatives

Copies of any agreements or other documentation can be included in an appendix.

2. Protecting your product • do you need to consider either a copyright, a patent or a trademark ?

3. Influences of the law • Its name (check www.justice.tas.gov.au/breg/new_pages/bn_info_1.htm • Location • Licences and permits • Consumers • Staff • Other, e.g. registration, OHS, taxation, insurance(workers compensation, motor vehicle third party,

motor vehicle comprehensive, public risk, fire

4. Where you got help

The various people and organisations that assisted you, eg

• your mentor • solicitor • accountant • government departments • Tasmanian Resources & Development

Hint: Continually expand your network of contacts whenever possible and commit people's names to paper.

These web sites may be useful: www.bli.net.au

www.dcita.gov.au/infoaccess

Step 4 : Comp let e t he Financ i al Ana ly si s & Cash Flow

This section should be headed FINANCIAL ANALYSIS & CASH FLOW and is your operational plan. Here you must present the financial details for your venture, based on the resources you require.

It could include information about:

1. The physical and human resources you will need

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2. Your staffing requirements • the staff you will need to employ ( the jobs they will do; the qualifications, training and/or

experience they will need; how you will find them and train them; what rates of pay and conditions they will be entitled to under law and what you will offer)

• the management skills and knowledge you will need, the tasks you will do and assume responsibility for.

3. Your establishment costs

4. Your sources of finance

5. Your cash budget • A cash-flow budget for the first twelve months is expected. Include the actual budget spreadsheet

as an appendix. Be realistic! Avoid the traps of overestimating receipts, especially your revenue, and not including all the payments, particularly the expenses.

6. Your information recording and security system • A brief outline of the process you will put in place to record, report and secure your transactions.

Copies should be created.

7. Your method for establishing the price of your product or service • A detailed analysis of how much it will cost you to produce your product and how you will

establish the actual price, eg, • recommended retail • margin on total costs • the "going" rate • what the market will bear • Note: break-even analysis may be useful here. Include full details in an appendix.

8. Your performance indicators

It must make mention of financial and non-financial indicators and include a budgeted

• Statement of financial performance (with indicators of profitability) - Here you will show the estimated revenue from the venture and the expenses of operating it for the first twelve months. All figures will be taken from your cash budget. Your may find it more convenient to include your Statement of Financial Performance in an appendix and just make a summary comment in this section.

• Statement of Financial Position (with indicators of liquidity) - Here you will prepare a statement of the business's assets and liabilities on the date consistent with the end of the period identified in your Statement of Financial Performance. All figures for assets, liabilities and owner’s equity will be taken from your cash budget. Your may find it more convenient to include your Statement of Financial Position in an appendix and just make a summary comment in this section.

S t e p 5 : O u t l i n e i t s F u t u r e P r o s p e c t s

In this section, which you should head, FUTURE PROSPECTS, you need to make an overall assessment of your business. What do you expect the viability and future prospects of your enterprise to be, i.e. whether you have achieved your objective and where it could lead.

It could include the following:

1. Your assessment of its financial performance

Here you will make comment on the profitability, and liquidity of the venture. Remember the ratios identified in class! Is the business a "goer"? Does your research suggest that the venture will generate sufficient cash flow to support the business and provide a return for the people who have invested time and/or money in it?

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2. Your assessment of its potential (life cycle and planning) Here you will make comment on its long term potential to survive in the market place and continue to meet the needs of the owners.

3. Your assessment of its export potential

Here you will make comment on it export potential for Australia and, more particularly, Tasmania

S t e p 6 : S h o w h o w y o u w i l l g e t S t a r t e d

In this section GETTING STARTED you must provide a time-line of all the things that must be done before the venture commences, by when they will have to be done and who will do them. If your venture is already operating, your time line needs to list what has been done and what needs to be done to take

your venture in the direction identified in this plan. You may need to allow time for advertising/publicity, obtaining materials, doing market research, getting your product made, etc.

You will also need to describe your venture team: the people who will assist you, the various roles that will have to be fulfilled when the business is operational, who from your venture team will perform them, how they will perform them and why they will perform them.

This is also the section in which to describe your management structure.

Step 7 : Adding the Appendi c e s

Choose your five appendices carefully. Each appendix should deal with one item and be restricted to one each.

They could include:

• legal documentation, such as a partnership agreement • forms for registering the business name • examples of the business’s stationery, business card etc • the product's design, trademark or label or logo • examples of advertisements • a copy of the business home-page • the Cash Budget spreadsheet • the Profit & Loss Statement • the Balance Sheet • biographical details about members of the Venture Team, eg name; age; address; schooling; skills, abilities

and experiences (eg writing, sums and figures, art, "gift of the gab", typing, making things, working, leading groups, problem solving); character or personal traits (eg complete jobs on time, strong focus on task, work without supervision, take responsibility, not a "whinger", gets along with people, sell things, takes criticism, positive and encouraging of others, self-motivated, assertive, energetic, organised)

• biographical details of your mentor, especially how this person has influenced you and his or her entrepreneurial talents and endeavours

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ACTIVITY 2: FLOWCHART FOR CONDUCTING AN ENTERPRISE

NO

NO

NO

START

IDEA GENERATION(Need Identified)

FEASIBLE?

BUSINESS PLAN

APPROVAL?

APPLICATION FOR FUNDS

(If Necessary)

APPROVAL?

OPERATE & MANAGE THE ENTERPRISE

ASSESS PERFORMANCE

CONTINUE?

WIND-UP & DISTRIBUTE PROFITS

NEED NEW IDEAS?

YES

RE-PLAN?

YES

YES

YES

NO

YES

YES

NO

END

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ACTIVITY 3: SAMPLE CASE STUDIES Below are a number of case studies which would be useful in providing contextual learning. Each shows the link to a syllabus strand, modules, and specific criteria. Every case study could be used in a variety of circumstances and help form assessments against criteria 2 and 7. Most have suggested answers.

Case Study 1

In January 2006 a well known tobacco company plans to market its low tar cigarettes in a twin pack with a CD of a band popular amongst young people packaged with the cigarettes. Purchases of the cigarettes will provide a musical bonus at a negligible cost, and CDs of other popular bands will be available from the tobacco company at a discount price.

(a) (i) Explain the role of marketing in business and how does it fit into the business planning process.

(ii) List and describe the steps in the successful marketing of a product.

(iii) Fully define these terms:

• marketing mix;

• market research;

• situational analysis.

(iv) What is a target market and how would you describe the target market for this promotional activity?

(b) Critically evaluate the implementation of this type of marketing campaign and describe its implications for management.

(c) (i) Discuss the conditions which could have influenced the company's choice of promotional activity.

(ii) What suggestions or alternatives would you make to this company about its marketing plan?

Links: Business Management, Marketing & Distribution + Public Relations, The Marketing Process, Criteria 6, 8, 9 and 10

Case Study 2

Peter was a country manager for The Kitchen Shop. He learned that he was HIV positive and informed his employers about his status. They informed him that his conditions of employment would not be affected. About a year later Peter sought a move to another location to be closer to specialised medical treatment. Although The Kitchen Shop agreed to the transfer, it was to a shop assistant's position of $25 000 not to a comparable management position of $52 000. Peter felt this action was demeaning and discriminating and took his complaint to the Equal Opportunity Board.

(a) (i) Explain the term 'industrial relations' and its importance to successful business operations.

(ii) Outline the main causes of industrial disputes in Australia.

(iii) Fully define these terms:

• employment contract;

• industrial dispute;

• disabilities discrimination legislation.

(iv) What arguments could Peter put before the Equal Opportunity Board to support his case.

(b) Discuss the ethical responsibilities of The Kitchen Shop in this situation.

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(c) (i) Discuss the factors which could have influenced the senior management of The Kitchen Shop to act as they did.

(ii) Draft what you consider to be an appropriate industrial relations policy for The Kitchen Shop.

Links: Business Management, Human Resource Management, Criteria 6, 8, 9 and 10

Case Study 3

Digitron is a manufacturer of electronic components. The foreman is responsible for directing the work on the factory floor and answers directly to the senior manager. The senior manager, concerned about the rate of output, asks the foreman to "look into it". The foreman reacts by using bells to signal the beginning and end of work breaks. Permission is required to leave the work area for any reason, for example, toilet breaks and making phone calls. Advance notice is required for time off, even family bereavement. Reprimands and threats become commonplace. The senior manager soon identifies declining worker morale and productivity.

(a) (i) Explain two factors which are exhibited by successful managers.

(ii) Explain the term 'management style'.

(iii) Compare and contrast the participative and laissez-faire styles of management.

(iv) Identify and describe the style of management demonstrated by the foreman.

(b) Describe the likely consequences of the foreman's approach for Digitron and for its employees. Discuss the responsibility of management in this situation.

(c) (i) Suggest ways in which the declining worker morale might have manifested itself.

(ii) Discuss a number of approaches the senior manager could employ to improve the atmosphere within the factory.

Links: Business Management, Management Styles and Theories, Criteria 6, 8, 9 and 10

Case Study 4

Vien Tin, an Australian mining company, is a joint venture partner with the government of a South East Asian nation. Its contract with the government allows for the importation of equipment and ensures the employment of many indigenous people, the establishment of training programmes, and the payment of considerable royalties. Though there are no formal environmental requirements, Vien Tin has maintained high standards in its treatment of effluent discharge and in its reafforestation policies. However, depressed tin prices internationally have seen the company's sales and profit figures decline markedly and this trend is expected to continue for two or three more years. The directors of Vien Tin are not overly concerned about the company's economic sustainability but about how best to maintain the returns to the various stakeholders.

(a) (i) Who are the stakeholders of a business ?

(ii) Fully define these terms:

• economic sustainability;

• joint venture;

• accountability.

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(iii) Distinguish between the internal and external business environments.

(iv) Explain how changes in the external business environment have impacted on Vien Tin.

(b) (i) Explain the ethical dilemma facing Vien Tin.

(ii) Discuss the principles that should guide its decision making.

(c) (i) Outline the financial and social costs of the current economic situation facing Vien Tin.

(ii) List a range of measures the local government could employ to assist Vien Tin maintain its returns to the various stakeholders.

Links: Business Management, Australian Business Sector, The National Economy + Australia in the Global Economy, Criteria 6, 8, 9 and 10

Case Study 5

In January 2007 a well known liquor company plans to market a small package of ‘top-shelf’ alcohol called ‘Slugger’ (eg. whiskey and vodka). Market research has shown that large bottles of these types of spirits are not attractive to 18 to 25 year olds but the concept of a nip or single serve of spirits, attractively priced, would be popular among them.

(a) (i) Explain the difference between a business being product driven or being market driven.

(ii) List the information that is contained in a marketing plan.

(iii) Define these terms:

• target market;

• primary packaging; and

• brand.

(iv) What is market research? Suggest two methods the liquor company may have used to gain the information they required.

(b) Evaluate the ethical implications of this type of marketing campaign for the management of the liquor company.

(c) (i) Discuss the factors outside the company that will impact or affect the marketing process.

(ii) What suggestions or alternatives would you make to this company about its marketing strategy?


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Suggested Answers:

(a) (i) Product Driven: When management assumes that consumers will favour products which offer the most quality for the price and thereby uses the organisation’s resources to produce quality products which will basically sell themselves.

Market Driven: Involves an analysis of the needs, wants, perceptions and preferences of consumers as the basis for designing products, pricing, promoting and distributing them.

(ii) Marketing Plan should include any of the following:

1. Executive Summary

2. Market description/Situational Analysis

3. Market Objectives and goals

4. Operational Environment

5. Marketing Mix/Marketing Strategy

6. Budgets

7. Controls

(iii) Target Market: a well defined set of customers who needs the company plans to satisfy. Involves management selecting one or more of the market segments and developing a positioning and mix strategy for each.

Primary Packaging: is the wrapper which is immediately around the product providing protection and information on the product.

Brand: a name, term, sign, symbol or design or combination of them which is intended to identify the goods or services of one or more sellers to differentiate their product from others.

iv) Market Research: involves the business asking questions that will give information about its market.

Techniques:

• ask customers a few questions as they purchase products,

• try informed questioning around the area,

• observing events and behaviours,

• random phone calls, and

• changes which comes as a result of marketing plan.

(b) Ethical implications of this type of marketing campaign:

o possibility of enticing young people to drink

o cheaper access to alcohol for young people and consequences of this, eg drink driving, street violence, alcoholism, financial stress, health issues etc

o resistance by shareholders, parents of teenagers, health workers etc.

o possibility of people smuggling in small quantities of alcohol to ‘dry’ environments

o resultant public relations/image of putting profit before social consequences

o empathy with financial needs of liquor company and the employment the company supports as a result of this plan.

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(c) i) Factors which will impact on the marketing process: consider interest groups of church, politics, families, general consumers, competitors and legal implications.

ii) Suggestions:

• Broaden target group to include others

• Promotion campaign.

• Change of name of product to a softer name rather than ‘Slugger’ which brings visions of sculling drinks.

• Offer sponsorship from profits to benefit young health issues or sport etc.

Case Study 6

The Hartz City Council had been plagued by industrial action for some period of time over the working conditions of employees who had to undertake work tasks out of doors. The employees, through their union, insisted that the health risks of exposure to the sun were considerable and demanded that employees be provided with adequate protection – sunglasses, sunscreen and headwear. Management, despite the considerable expense, eventually conceded. Some months later management noted that many employees were not wearing the glasses or headwear. They demanded that employees follow through with the agreement or they would be denied access to their worksite and would not receive their wage for that period of time. The employees are now on strike over this issue.

(a) (i) Outline two factors that influence industrial relations.

(ii) List the responsibilities of a human resource manager.


• industrial relations;

• trade union; and

• enterprise bargaining.

(iv) The case study above refers to a change in workplace practice at the Hartz City Council. Briefly describe the process the union may have gone through in bringing about the initial change.

(b) Discuss the ethical responsibilities of the Hartz City Council and its employees in this situation.

(c) Discuss the courses of action that the management of the Hartz City Council could have taken to alleviate or avoid the problem they are currently faced with.

Links: Business Management, Human Resource Management, Criteria 6, 8, 9 and

Suggested Answers:

(a) (i) Two Factors which influence industrial relations:

• Business Policies

• Nature of Business

• Organisational Hierarchy

• External Factors: Politics, Economics, Environment, Legislation, New Technology

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(ii) Responsibilities of a human resource manager:

• Recruitment and Selection

• Training and Development

• Health and Safety

• Discipline

• Staff Appraisal

(iii) Industrial Relations involves the interaction and behaviour of workers and their respective unions, employers and other institutions within organisations and how they deal with one another.

Trade Unions are groups of people doing similar work who have united for their own protection, to look after their interest in all matters relating to employment.

Enterprise Bargaining is a situation where State awards are abolished in preference to individual employee contracts.

(iv) Possibilities include:

• Collected information from employees

• Researched

• Negotiated

(b) A discussion of some of the following for:

• the Council

• Health and Safety issues are greater than cost factor

• Long term repercussions to health

• Legal responsibilities to enforce Health and Safety guidelines

• Leading PR image

• Ethical Responsibility for employers to create a culture where open speech is encouraged

• for Employees

• To respond to the improvement in working conditions by wearing sun-protective gear

• Right/Wrong to strike when they aren’t following through with their responsibilities

• The consequences to the community as a result of striking.

(c) A discussion of the any of the following courses of action the Council may have taken:

• Education and Training

• Reward System for safety adherence

• Negotiate and discuss with employees

• HRM to discuss problem with individual employees not abiding by H & S guidelines

• Employee involvement in selection and purchase of protective gear

• Management by example

• Provision of adequate equipment to begin with

• and by employees

• Wear protective equipment

• Promote protection to others

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• Encourage other employees not to endanger themselves

• Leaders in the community

• Abide by OHS legislation

Case Study 7

Electrona Engineering had been facing a downturn and the risks for the business were considerable. The manager, who had little formal training but had made her way up through the business, knew it was time for hard decisions to be made. The number of days the factory operated was reduced and the time when the factory wasn’t operating was used for training the workforce. She ‘flattened’ the management structure, took a smaller, less glamorous office, and undertook team building training with the employees. This led to suggestions for a redesign of the production process and this was undertaken. Improvements in quality and efficiency have been noted in the eighteen months since the process began.

(a) (i) Explain the term ‘management style’.

(ii) List a range of skills and personal qualities exhibited by successful managers.

(iii) Compare and contrast the laissez faire and autocratic styles of management.

(iv) Identify and describe the style of management demonstrated by the manager of Electrona

Engineering.

(b) Discuss the ethical implications implicit in the manager's approach at Electrona Engineering and describe the specific benefits for the firm.

(c) Explain the principles of Total Quality Management and how they were implemented at Electrona Engineering.

Links: Business Management, Management Styles and Theories, Criteria 6, 8, 9 and 10

Suggested Answers:

(a) (i) Management Style refers to the manner which a manager may use to organise and co-ordinate staff, depending on personality, age, ethics, degree of risk in the industry, philosophy, training, background, experiences etc.

(ii) Skills and personal qualities exhibited by successful managers:

• Communication Skills

• Delegation

• Decision Making

• Time Management

• Stress Management

• Analytical Skills

• Interpretive Skills

• People Skills

• Interpersonal Relations

• Goal Setting

(iii) Laissez Faire: Managers have little to do with the day to day running of the business. Employees have a great deal of decision making power.

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Autocratic: Managers have a lot to do with the day to day running of the business. Managers make all the decision with little or no consultation with employees.

(iv) Electrona Engineering management demonstrated the participative style of management which emphasises teamwork and employees are involved in the decision making process and most decisions are made democratically.

(b) Ethical implications:

• Stakeholders are aware and approve of changes

• Alternative of no action which would lead to the closure of the factory and loss of jobs

• Attitude of employees to changes if autocratic style was used

• Possible loss of hours for employees

• Benefits of flatter structure with more input from employees, greater decision making contributions and perceived value thereof which may lead to increased morale and greater cohesion.

• Increased quality and efficiency as a result of the redesign and resultant increased profits

• Greater returns for stakeholders

• Improved financial stability of Electron Engineering in the future and expected job security

• Training which implies increased skills and morale of employees.

(c) The Principle of Total Quality Management and how it was implemented at Electrona Engineering.

TQM is the way a business is organised through its management philosophy to creatively involve all employees in seeing continuous improvement in the quality of all processes, products and services of the business. This means that management at all levels actively involve and encourage all employees to participate in how the business operates by looking at the way they are doing things and suggesting improvements on a continuing basis.

Teams are formed at Electrona Engineering which is typical of TQM. The main function of these teams should be to examine present practices and devise methods of best practice. It was through the team building training session of employees that suggestions of the redesign of the production process took place. This is typical of TQM. The teams responsibility is to develop the whole idea, from identification of the problems to implementing the plan, to fixing it. Total customer satisfaction should be the aim of TQM.

Case Study 8

Ozsteel Ltd is a major manufacturer of iron and steel products for the domestic and international markets. The managers believe that to remain viable in an increasingly competitive international market and to generate the returns demanded by shareholders, the company must undergo a process of restructuring, which will mean the closure of some of its oldest factories. The city of Castle Hill, already suffering a high level of unemployment, is the location of Ozsteel’s biggest factory and its closure will mean the loss of 1500 jobs directly and an estimated 210 indirectly.

(a) (i) Distinguish between the internal and external business environments.

(ii) List the stakeholders that may be involved in the case of Ozsteel Ltd.

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• micro economic reform;

• opportunity cost; and

• financial viability.

(iv) Explain how changes in the external business environment have impacted on Ozsteel Ltd.

(b) Discuss the ethical factors facing the various stakeholders involved with the impending closure of the Ozsteel Ltd factory in Castle Hill.

(c) Outline the financial, social and economic costs likely to be created by the impending closure of the Ozsteel Ltd factory at Castle Hill.

Links: Business Management, Australian Business Sector, The National Economy + Australia in the Global Economy, Criteria 6, 8, 9 and 10

Suggested Answers:

(a) (i) Internal business environments relate to the inside running of a business and includes management’s policies and decision making process which influences the relationships between management and staff.

External business environments however, refer to those things from outside the business which are relevant to the running of the business. It may include actions by consumers, government departments, stockmarket, competitors, unions, suppliers, financial institutions and other interest groups such as ecology groups, education groups and the media.

(ii) Stakeholders:

• Suppliers of iron and steel

• Purchasers of iron and steel products domestically and internationally

• Transports of raw material and finished products

• Shareholders

• Employees and the families

• Relevant unions

• Castle Hill Business’ - multiplied effect

• Other related business groups

• Government

• Township

• Other competitors

(iii) Micro Economic Reform: Changes in policies which affect individuals, well defined groups of consumers, firms or industries in the economy. Focuses on restructuring of industries, competition between companies and aims to improve in economic efficiency.

Opportunity Cost: The cost of doing something as measured by the loss of opportunity to do the next best thing with the same amount of time or resources.

Financial Viability: Weighing up the possibilities of future financial returns or losses to ascertain the future of a business or company.

(iv) Impact of external environment on Ozsteel Ltd:

• Decreasing costs should reap greater returns to shareholders

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• Downsizing of Ozsteel could lead to closure of Ozsteel with subsequent increased unemployment and multiplied effect of high unemployment in a town dependent on the company.

(b) Ethical responsibilities for management of Ozsteel Ltd:

• responsibility to shareholders to guarantee a reasonable rate of return

• to employ employees and guarantee them a security of income

• to the community to ensure the survival of other businesses and the township as a whole

• to those indirectly employed by the company

• purchases as their businesses will be adversely affected

Similar lists can be developed for the other stakeholders identified in Part A (ii).

(c) Financial:

• Increased unemployment will lead to a decrease in income and decreased spending. This will have an adverse effect on the whole township.

• Change in share value

Social:

• Uncertainty of townships future could lead to decreasing economic activity

• Resistance to closure

• Community residents could relocate

• Decreasing value of real estate, downsizing of infrastructure

• High unemployment levels could lead to higher crime rates

• Increased unemployment could lead to increased enterprise bargaining and possible exploitation of workers

Economic:

• Closure may lead to a increased chance of a monopoly in the steel and iron manufacturing industry. This could lead to price dictation.

• Balance of trade problems

Case Study 9

The Wholefoods Company manufactures foodstuffs displaying the motto ‘Healthy and Responsible’ on all its packaging. All suppliers are required to use specified environmentally friendly farming methods and to limit the use of pesticides to prescribed levels. A transport contractor reports to a senior manager that one supplier may have used aerial crop dusting on his grain which is now mixed in a silo with grain from other suppliers. The manager believes this is rumour and chooses to ignore the report, aware that disposal of the silo of grain would mean that production goals would not be met.

(a) (i) Explain these three roles of management:

• interpersonal;

• goal setting; and

• decision making.

(ii) Distinguish between short term and long term organisation planning.

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• mission statement;

• autocratic management; and

• control function.

(iv) Identify and describe two criteria which could be used to evaluate organisational efficiency.

(b) Discuss the ethical implications of the senior manager’s decision to ignore information made available to him by the transport contractor.

(c) Describe how the management of the Wholefoods Company may be influenced by social and environmental factors.

Links: Business Management, Management Styles & Theories, Laws Regulating Business, Criteria, 6, 8, 9 and 10

Suggested Answers:

(a) (i) Interpersonal role: This role involves the relationships between people, including communication (with staff, customers, suppliers etc.) and leadership.

Goal setting role: Determining objectives that an owner/manager has to ensure the success of the business. Goal setting in an integral part of the planning process, with goals set being compared to results as part of the control function.

Decision-making role: Management needs to choose among alternatives. This includes generating choices, analysing the options and selecting and implementing the most appropriate course of action.

(ii) Short term plans made by the management of a business usually have a timeframe of one year or less, whereas long term plans usually have a timeframe of 1-5 years. Long term plans are inclined to be of a more general nature, while short term plans are more specific and detailed.

(iii) Mission statement: Is a statement of organisational goals which provide a focus for strategic planning. It is a general statement of the direction and philosophies of the business. The statement establishes performance expectations of a business.

Autocratic management involves a leadership style which does not allow workers to take part in decision making - management makes all the decisions with little or no consultation.

Control function: A function of management where managers control all aspects of the business, such as staff, customers and stock. Control involves constant checking and evaluation of actual results against planned goals, resulting in corrective action where required.

(iv) Examples:

* Ability to work to or within the budget for a given period of time.

* Improving productivity whilst minimising increases in costs.

* Keeping workplace accidents to a minimum by using safe work practices.

* Developing new, innovative products to replace those approaching obsolescence.

(b) The company’s motto is ‘Healthy and Responsible’. This motto appears on all its packaging, and consumers therefore expect the foodstuffs to be produced to a particularly high standard. By ignoring the possibility that one supplier may have breached these standards, the senior manager brings into question a number of ethical issues.

• To whom and to what is the manager giving his loyalty?

• Whom could his decision or action injure? For example, could allergy sufferers experience health problems as a result of this decision?

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• Is the decision in the long term interests of the company and its customers?

• Could the manager disclose the decision to the directors, staff and customers without qualms?

If the manager feels that there is a conflict, (s)he needs to define the problem from several different ethical viewpoints, especially from the perspective of those likely to be affected by the decision. Ultimately, if the issue is ethical (s)he needs to ask: ‘Could I go public with this decision without negative consequences?’ If the answer is ‘No’, as it could be in this case, then the manager needs to explore further.

(c) Values, customs and attitudes in society change over time. Social attitudes towards health and environmental issues have changed in recent times with ‘green’ politics and ecological concerns being of particular importance. Managers should look for shifts in these factors as they are likely to influence goals and strategies. Marketing strategies may require modification.

Case Study 10

The financial manager of Strahan Trading and Shipping Pty Ltd is responsible for the maintenance of financial records and planning. She has completed the financial reports for the 1997/98 financial year indicating that actual profit is close to budgeted figures. However, the business’ records and cash budget indicate that the company is experiencing a cash flow problem.

(a) (i) Distinguish between service and trading firms.

(ii) Explain how the profit of a business is determined.


• asset;

• liability; and

• proprietorship.

(iv) Explain how a business can determine its liquidity.

(b) The financial manager believes she can resolve the cash flow problems of the business by reducing the hours of two long serving casual staff during the months June to September. Discuss the moral and ethical issues involved in this proposed solution.

(c) (i) Explain how it is possible for a business to make a profit and still experience a cash shortage.

(ii) Explain how a cash budget can assist management in avoiding cash shortages.

Links: Business Management, Australian Business Sector + Financial recording in Business + Financial Reporting in Business + Financial Decision Making in Business, Criteria, 6, 8, 9 and 10

Suggested Answers:

(a) (i) A service firm is a business that provides a service, such as hairdressing or cleaning, and charges a fee for that service. A trading firm is a business that purchases stock or inventories from a wholesaler or manufacturer and resells it at a profit.

(ii) The profit of a business amounts to revenues earned less expenses incurred by a business over a specific period of time. For example, for a cleaning business it would earn revenue by charging cleaning fees and incur expenses such as wages, materials and transport. If revenues exceed expenses the business makes a profit whereas if expenses exceed revenue the business would make a loss.

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(iii) An asset is something owned by the business which is of future value. An asset may be physical (tangible) (eg. equipment) or non-physical (intangible) (eg. goodwill, patents).

A liability is an amount owed by a business to external parties, for example, creditors or a financial institution.

Proprietorship is also known as owner’s equity. It is the money invested in the business by the owner or owners. (In the case of a company, it would be referred to as shareholders’ equity.)

(iv) Liquidity refers to the business’ ability to meet its short term financial commitments, ie. those commitments generally due or owing within the next year. It relates to current assets and current liabilities. If current liabilities exceed current assets, the business’ liquidity would be a serious cause for concern. Generally, a business would aim to ensure that current assets exceed liability, ideally at a ratio of 2:1.

(b) A business may sometimes have conflicting problems. In this case, the manager is concerned with cash flow, ie. that cash outflow may be greater than cash inflow. A possible solution is to reduce the hours of two long-serving casual staff for three months. However, this creates a new human relations problem for the management. A decision which may appear to be justified for financial reasons may have an adverse effect on morale, interpersonal relations in the workplace, and employee motivation.

Ethical decisions like this place managers in situations where they may have to sacrifice some values for others. Ethics involve moral principles which can affect the climate in an organisation. Loyalty to employees, and by employees to the business, is an important aspect of business management. Management will need to list alternatives to resolving the cash flow problems and consider the implications of each.

(c) (i) Profit is determined by deducting expenses from revenues. However, cash flow relates to the movement of cash into and out a business. A cash shortage is experienced when the business pays out more cash than it receives.

Often people will confuse profit with cash and assume that if a business makes $400 profit the amount of cash the business has on hand will increase by $400. This is not necessarily so. Many firms sell on credit, which is where the sale is made and the customer pays at a later date. Most businesses say that the money is earned when the sale is made, not when the business receives the cash. A business can then make a large profit and still be in trouble because it has no cash and is unable to pays its creditors. 1

(ii) A cash budget is a document that sets out all future cash receipts (when the business receives cash) and future cash payments (when the business pays cash out), and determines whether there is likely to be a cash shortage or a cash surplus in the future.

A cash shortage or deficit is when the business pays out more cash than it receives. By identifying the future cash receipts and future cash payments, management can see when cash shortages are likely to occur and plan accordingly. They may decide to spend less by postponing the purchase of non-essential items, or arrange to borrow cash from another source. Forward planning gives management the opportunity to avoid cash shortages.

Case Study 11

The Confectionery Group is embarking on a promotion of several new product lines designed to replace products in decline. The marketing department is concerned with the presentation and pricing of these products which are designed to appeal to consumers who are attracted to natural products with no added sugar or artificial colourings and flavourings. One new line is to be sold as a branded product and the other as a generic product via a supermarket chain.

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(a) (i) Explain the difference between a retailer and a wholesaler.

(ii) Describe the four stages in the product life cycle.

Note: You are encouraged to use a simple diagram to illustrate your response.


• durable goods;

• secondary packaging; and

• generic products

(iv) What is a logo? Briefly describe two ways in which a logo may influence consumer behaviour.

(b) A rival supermarket chain has offered the Confectionery Group special display positions and promotion for the branded product in order to compete with the generic product. Because the Confectionery Group has been contracted to produce the generic product for a particular supermarket chain, what are the ethical implications of agreeing to the proposal made by the rival supermarket?

(c) In order to establish market share, the supermarket chain decides to adopt a price penetration policy for the generic product. Explain what this policy involves and how their competitors are likely to react to this approach.


Suggested Answers:

(a) (i) A retailer is a person or business at the end of the distribution channel. A retailer sells products directly to consumers for their personal use.

A wholesaler is a business that sells goods to those who are buying in order to resell them.

The number of levels in a distribution channel may vary. A typical example is given below:

PRODUCER

WHOLESALER

RETAILER

CONSUMER

The producer manufactures the product and sells it to the ...

wholesaler, who distributes it to the ...

retailer, who sells the product directly to the ...

(ii) Stage I: Introduction - The market is beginning to become aware of the product.

Slow sales growth and low or non-existent profit.

Stage 2: Growth - Product rapidly gaining market acceptance. Sales and profits rise.

Stage 3: Maturity - Market acceptance, high sales, stable profits. Likely to be increased competition.

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Stage 4: Decline - Product sales and profit drop. Likely to decrease price to clear stock, as it may be in danger of becoming obsolete.

(iii) Durable goods are those with a long shelf life. Turnover periods for these goods (such as sports equipment) can be relatively long, unlike non-durable goods which need to be sold in a short space of time as they may spoil (eg. dairy foods).

Secondary packaging is designed to protect the primary packaging, which is immediately around the product. It is often used to advertise and draw attention to the product. For example, breakfast cereals are commonly wrapped in plain, sealed packaging which is then placed in a box which protects the goods and uses brand names and images to draw the consumer’s attention to the product. The box is an example of secondary packaging.

A generic product is an unbranded, plainly packaged version of a common product, which is generally less expensive than branded products. The lower price is generally achieved by low packaging and labelling costs. The ingredients may be of a lower quality and advertising costs are minimal.

(iv) Businesses need to have a sense of identification with their customers and others with whom they deal. A logo is a firm’s symbol or sign. A business logo is an important part of identifying the business, which is why many have their names included in their logo as it is clear and easily recognised.

A logo may influence consumer behaviour because it is:

• familiar, encouraging brand loyalty; and

• it is a recognisable symbol of quality associated with that brand.

For example, the ‘Golden M’ of Macdonald’s is used to attract customers to a business which has established a reputation for consistent quality and familiarity with products.

(b) The Confectionery Group is clearly aiming to maximise sales of their products in order to increase profits. By selling to an increased number of outlets, sales may be boosted. However, the group needs to consider its relationship with its customers.

If the original clients believe that they have the advantage of introducing a new product with a degree of exclusivity, they may be planning on using a price skimming policy, that is charging a high price of the new branded product. This can allow them to build up a market before competitors are able to offer the product and force prices down.

By accepting special display positions and promotion from a rival supermarket chain, the Confectionery Group may disadvantage their original clients and damage the relationship they have with them. Their actions may not

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be in breach of contract but they may be seen as unethical as they could be seen as maximising their profit at the expense of a client.

(c) From page 175 of VCE Business Management, Book 1: A (price) penetration policy is where the firm sells the product at a loss in the hope that it will build market share, and that as the product continues to be manufactured the skills of those manufacturing it will increase, which will lead to profit in the future. This policy has advantages where the market is very competitive price-wise.

If this policy is adopted the competitors have several options. Firstly, they may choose to ‘meet the competition’ by reducing their prices to match. Alternatively, they may choose to ‘beat the competition’ by undercutting them. Both alternatives involve sustaining a loss in the short term. However, they may lose market share in the long term if they choose to ignore their competitor’s strategies.

Case Study 12

The Board of a stevedoring company have decided to undertake a programme of workplace reform. This programme includes downsizing the workforce by 20% and making redundancy payments to workers who have been employed by the company for five years or more. Union representatives have put forward the employees’ position but an acceptable agreement has not been reached. Strike action has been proposed.

(a) (i) Explain the difference between redundancy and retirement.

(ii) List four possible causes of industrial disputes.


• downsizing;

• trade union; and

• workplace reform.

(iv) Briefly explain the possible role of an industrial tribunal if a strike occurs.

(b) The workplace atmosphere at the stevedoring company has been affected by the proposed reforms. Explain how the proposals may affect the work performance of those employees who remain employed by the business, that is, retain their jobs.

(c) The management of the company is keen to retain employees who are multi-skilled and interested in updating their skills.

(i) Why would these employees be valued by the company?

(ii) Prepare a list of ways in which management can indicate to these employees that they are valued by the company.


Suggested Answers:

(a) (i) Redundancy is the laying off of employees on a permanent basis because their work is no longer necessary. Redundancy in the labour force may occur through the closure of uneconomic industries, the failure of unprofitable companies, the introduction of labour-saving manufacturing methods or equipment and the introduction of new technologies. Employees made redundant may be entitled to some compensation for the loss of their job.

Retirement is when a person leaves their job because they have reached an age at which they no longer wish or are able to work. For most people this occurs at the age of 65, although some people may choose to retire early (usually from 55 years of age on) or may continue to work after 65.

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In the case of redundancy, the job ceases to exist, whereas in the case of retirement the worker leaves the job and their position may be filled by another person.

(ii) Some answers may be:

• Wage/salary.

• Working conditions, such as health and safety.

• Unfair dismissal of colleagues.

• Breach of award conditions.

(iii) Downsizing relates to a management decision to reduce the number of employees in order to minimise staff costs.

A trade union is an association of employees for the purpose of protecting and improving the terms and conditions of employment and presenting a collective view in matters affecting the union members. Trade unions perform a number of services for their members, including representing them in the industrial relations system.

Workplace reform involves changing the organisational structure of the workplace. It may, for example, involve moving from an award-based system to one of enterprise bargaining, where the employees reach agreement with management on the terms and conditions of their employment.

(iv) Industrial tribunals were originally established by government under the Industrial Training Act 1964, and their jurisdiction has been gradually increased to deal with many areas of dispute between employer and employee, eg. unfair dismissal, equal pay, redundancy claims.

Where an industrial dispute occurs, the Industrial Relations Commission must be informed of the parties to the dispute, the matters in dispute and any other details of the dispute. Where a strike is proposed or has begun a time and place is established for a hearing. The parties to the dispute are able to put their case to the tribunal, who determine what action should be taken. Some people see the role of an industrial tribunal as encouraging an ‘adversarial’ environment, that is encouraging an employer vs. employee situation. Others see it as an opportunity for an objective third party to gather evidence about the industrial dispute and to give a decision which takes all the facts into account.

Employer-employee relations can be seriously affected by a programme of workplace reform. An environment of mistrust may evolve. Even those employees who remain employed by the business may feel disappointed, insecure and angry. Creativity is likely to decline, since taking risks can lead to potential failure. Employees with high needs for security or affiliation may experience a sense of loss as they see their colleagues lose their jobs.

There is a risk that the feelings of insecurity which result in those retaining their jobs may result in a poor work environment, in which management are not trusted, absenteeism increases through stress related conditions, skilled workers look for work elsewhere and personal concerns become far more important than organisational goals.

(c) (i) Employees who are multi-skilled and interested in further work-related training would be valued by the company as they have the base knowledge and flexibility required for a changing work environment. As the company undergoes workplace reform, they will need employees who are prepared to learn new work techniques and skills which will allow for greater efficiencies. Those with rigid attitudes to new work practices are likely to resist reform.

(ii) As stated above, workers may see rewards as being in the form of money, recognition, affiliation and security. Management can indicate to employees that they are valued by putting into place a range of motivational strategies. These might include:

• bonuses linked to productivity;

• promotional opportunities based on skill acquisition;

• basing work practices around team building;

• encouraging workers to see themselves as long-term

(eg. improved superannuation schemes).

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Case Study 13

McDonalds, the multinational restaurant chain, has recently changed its marketing mix. In some of its inner city outlets it has added a new section known as McCafe. Whilst continuing to sell its range of burgers, fries, soft drinks and desserts, this new section also sells cappuccinos, hot chocolate and a variety of pastries and cakes. These additions to the range of goods sold by McDonalds in the past is seen as recognition of the need to cater for a wider range of customers.

(a) (i) Distinguish between advertising and promotion.

(ii) Explain how market research may aid in the management planning process.


• marketing plan;

• leveraging; and

• target market.

(iv) Explain how a business can appeal to a particular market niche.

(b) The property manager has identified a site in central Hobart which she believes would be ideal for development. The site is currently occupied by a vacant building with an historically significant facade (frontage). Discuss the moral and ethical issues of demolishing the building in order to proceed with the development.

(c) The company’s management is keen to establish the development referred to in Part II and to be seen by the community as a responsible corporate citizen. Discuss two possible strategies the company might use to achieve these objectives.

Links: Business Management, Marketing & Distribution + Public Relations, The Marketing Process, Criteria 6, 8, 9 and 10.

Suggested Answers:

(a) (i) Advertising: the best known method of promoting a product using a variety of media, including radio, TV and the print media (newspapers, magazines). The goal of advertising is to inform and persuade customers.

Promotion: a more general term for increasing market awareness. It includes advertising but may also take the form of publicity campaigns, personal selling and sales promotions.

(ii) Market research involves getting to know the market so that management can plan to meet that market’s needs. Primary data may be collected by having consumers respond to questionnaires (personal and telephone), observing market behaviour, and monitoring the effect of advertisements. Secondary data of a more general nature (e.g. demographic changes) is available from bodies such as the Australian Bureau of Statistics, industry associations and local councils.

(iii) Marketing plan: a general outline of management’s market objectives, which may include:

• market description (actual and potential buyers)

• market objectives (detailed view of what a business is trying to achieve)

• operating environment (macro environmental factors)

• marketing mix (product, promotion, price and location)

Leveraging: extending a brand name to new products. For example, Mars now has a number of related products, such as chocolate bars, ice creams and flavoured milk. The aim is to use a familiar name to sell similar products and capitalise on brand loyalty.

Target market: the users (potential and current) of a product/service. The market plan is developed so that the product is marketed at a particular group who have been identified as the most likely users of the

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product/service. By focussing on this target market, management aim to maximise efficiency and minimise wastage.

(iv) A business may appeal to a particular market niche by producing, or modifying, a product or service so that it meets a need not currently being met or met adequately. Rather than aiming at a non-segmented market (which reaches the whole or total market), a business focuses on a segmented market (which concentrates on one part of the total market).

(b) Demolishing an historically significant building could alienate the business from sectors of the community. It is therefore important that the development of such a site takes into account community sensitivity, for example, environmental, historical and social concerns. To ignore such concerns endangers the business’ corporate image. Just as individuals stand to lose by offending others, a business may lose its reputation as a “good corporate citizen” if it appears be ignoring community needs.

If it appears that the business is driven purely by commercial greed, the community may regard the business as unethical and this may result in a public relations disaster, boycotts of products and so on.

If the business can liaise with relevant community groups (stakeholders) in an effort to appease them, it is more likely to meet its long term objectives and be seen as responsible and trustworthy.

(c) Discussion of two possible strategies, which may include:

• Retain the facade and build a modern, functional structure behind that facade.

• Work with National Trust/Heritage Commission to design a replacement building using a design and materials which blend into the historical mix of surrounding buildings.

• Effectively argue that the community will benefit more from development of the site, through increased employment opportunities, the image of the city etc.

• Select an alternative site and use the “responsible corporate citizen” image to gain community support for the business.

• A combination of the above.

Case Study 14

Business Planning Services is a small business which has been in operation for two years. When it was established, a staff of five was employed in the office to provide administrative support. The business is now expanding and is seeking to develop tighter financial strategies which can provide management with the feedback and timely information it requires to improve its performance.

(a) (i) Distinguish between a profit and loss statement and a balance sheet.

(ii) Explain how ratios of liquidity and profitability can assist in analysing a business’ performance.


• credit sale;

• overdraft; and

• cash shortage.

(iii) Describe two sources of finance which a business may seek when facing a cash shortage.

(b) The receptionist has also been given responsibility for checking receipts and reimbursing employees who incur out-of-pocket business expenses from petty cash. She claims $25 from petty cash to cover the cost of a courier although she does not provide a receipt. What moral and ethical issues might be involved in this action?

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(c) Management employs an auditor (accountant) to check their records. The auditor finds that a significant number of cash payments cannot be traced back to source documents, for example, receipts and cheque butts. What action should management take to resolve this problem?

Links: Business Management, Financial recording in Business + Financial Reporting in Business + Financial Decision Making in Business, Criteria, 6, 8, 9 and 10

Suggested Answers

(a) (i) A profit and loss statement details the revenues earned and the expenses incurred during a particular financial period. If the revenues exceed the expenses, the business has made a profit for the period. If the expenses exceed the revenue, the business has made a loss.

A balance sheet details the assets (economic resources owned by the business), liabilities (amounts owed by the business to external parties) and proprietorship (the amount of capital invested in the business by the owner/s). It follows the accounting equation: P (Proprietorship) = A (Assets) - L (Liabilities).

(ii) Liquidity is the ability of a business to finance its short term debts. It may be measured by two ratios: working capital (current assets divided by current liabilities) and quick assets ([current assets - inventories] divided by [current liabilities - overdraft]). The ratios indicate the ability of a business to meet its short term debts. For example, a working capital ratio of 2:1 would indicate that a business has $2 of current assets for each $1 of current liabilities, and the business should therefore be quite capable of meeting short term debts. A quick asset ratio of 0.3:$1 would indicate that a business has 30 cents of quick assets for every $1 of quick liabilities - in this situation, the business may have a short term liquidity problem.

The profitability ratios indicate what proportion of earnings is profit. They include gross profit ratio (gross profit per dollar of sales), net profit ratio (net profit per dollar of sales), rate of return on owners’ equity (return on investment) and rate of return on total assets (return on all assets). These returns can be compared to other businesses in the industry and other investment options to see if they are competitive. If other businesses in the same industry are giving higher returns, management may need to review performance.

(iii) Credit sale: A credit sale is based on the concept of ‘buy now, pay later’. The purchaser receives the goods on the understanding that they will pay for them at a later date. The terms of this sale are generally stated on an invoice, which details the amount owed and the amount of time given to pay, e.g. 30 days. The object of providing credit is to increase sales and profitability, however there is a danger that payment will not be received resulting in a bad debt.

Overdraft: A bank overdraft is generally made available on a cheque account. It means that the account holder has spent more than they have in the bank and consequently overdraws, i.e. owes the bank money. Overdrafts are not automatically made available, and permission to overdraw is generally given by the bank with an agreed limit. Overdrafts are usually made on a short-term basis and can be used for short term cash flow problems.

Cash shortage: When a business is suffering a cash shortage, it does not have sufficient cash available to meet its immediate needs. Cash means cash on hand and highly liquid investments. It indicates that the cash outflows from the business exceed the cash inflows. If the cash shortage is short term, this is regarded as a liquidity problem.

(iv) If the business monitors its cash situation carefully, it should be possible to predict likely periods of cash shortage and make arrangements to cope. These may include getting permission to overdraw or extending the terms of credit with creditors (e.g. arrange to pay for goods in 60 days instead of 30). If the cash shortage is likely to extend beyond a few months, the business may need to review its cash budget and seek a loan. Alternatively, it may seek further capital from the owner(s).

(b) There are a number of ethical and organisational issues involved in this situation. Firstly, the receptionist had been placed in a position as a trusted employee. By not following standard procedures in her responsibility as petty cashier, she had breached the trust placed in her by her employer. This places a serious doubt regarding her honesty and the trust which should be placed in her. Her failure to produce cash receipts places her position in doubt.

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However, her employer needs to take some responsibility for this situation, as it places temptation before employees experiencing financial difficulties. In order to ensure that this situation is not to be repeated, management need to put stricter financial controls into place.

(c) Management actions:

• Ensure that there is a separation of duties, for example, that one person checks the supporting documentation on petty cash claims and authorises a second person to give the cash reimbursement.

• Rotate duties on regular basis, thus ensuring that one person is not in control of cash for an indefinite period.

• Put into place adequate authorisation procedures, for example, all cheques and credit notes must be authorised and signed by two selected persons who insist on supporting documentation prior to signing.

• A bank reconciliation to be undertaken on a monthly basis to check that all bank transactions can be accounted for. The person to undertake the reconciliation should not be the person in charge of cash payments and receipts.

Case Study 15

A legal firm is seeking to fill a vacancy for a secretary who will be required to work for several partners and to travel to its offices throughout the State. It is aware that a newspaper advertisement is likely to attract a large number of applicants, many of whom would be totally unsuitable for the job. The firm decides to employ a personnel agency to short list applicants and to undertake preliminary interviews.

(a) (i) Explain why employers may ask prospective applicants to address selection criteria.

(ii) List and briefly describe five stages in the employment cycle. You may use a diagram to illustrate your answer.


• screening process;

• aptitude test; and

• induction process.

(iv) Explain why it is inappropriate to ask discriminatory questions at an interview.

(b) The personnel manager of a competitor contacts your business and asks for a referee check on a former employee. You are aware that the person in question has a medical condition which may make it difficult for them to perform some of the required tasks but you do not inform the personnel manager of this. Discuss the moral and ethical implications of not mentioning the medical condition.

(c) Discuss two advantages and two disadvantages of testing prospective employees. Your answer should give examples of the types of tests that may be administered.


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Suggested Answers:

(a) (i) The provision of selection criteria is advantageous for the employer and the prospective employee. Selection criteria give applicants a clear picture of the employer’s requirements and expectations. It also allows applicants to match the skills required with their previous experience and skill levels.

From the employer’s point of view, a clear outline of what is required is likely to discourage applicants who cannot meet the essential or desirable requirements. This means that an employer’s time will not be wasted testing, interviewing and checking references of people who were not suitable for the position.

The identification of selection criteria also assists the personnel manager, who can focus on testing the skills and experience required rather than other non-essential items.

(ii) • Recruitment (identifying applicants for the position).

• Selection (a suitable applicant is chosen).

• Orientation/Induction (introducing a person to the organisation and job).

• Training (providing employees with knowledge/specific skills required).

• Appraisal (assessing/reviewing performance).

(iii) Screening process: eliminates applicants who do not have the necessary skills and expertise for a particular position. Results in a short list of applicants who are most likely to meet employer’s job specifications.

Aptitude test: tests the ability of an applicant to perform certain tasks. Such tests may be industry specific, for example, whether person is mechanically minded.

Induction process: the orientation of new employees into an organisation, to ensure that they understand essential procedures and the organisation’s aims and ethos.

(b) A previous employer has an obligation to pass on relevant information when approached as a referee. If the referee is aware of a medical condition which may make it difficult for an applicant to perform some of the required tasks, they may be placing the applicant and their possible future colleagues in a potentially dangerous situation. This has legal and ethical implications for all concerned. Failure to report a medical condition may invalidate any insurance claims made by the employer or employee.

(c) Advantages:

• Can create a profile of the applicants characteristics, which can be compared to job specifications.

• Analyse job relevant skills (e.g. eye coordination, ability to distinguish colours, manual dexterity, ability to follow written instructions).

• Some tests (e.g. psychological and personality) may indicate an applicant’s ability to work in a particular situation, for example in a small group or on isolated tasks.

Disadvantages:

• Can result in labelling of employees (e.g. loner) which may be harmful.

• Old testing records may be retained although they may no longer be relevant. For example, a person considered unsuited to working in group situations may develop those skills over a period of time and with the appropriate mentoring.

• Stress may affect testing results.

Case Study 16

A fashion outlet was experiencing difficulty due to poor employer-employee relations. Employees felt that they were underpaid, undervalued and had little opportunity to show initiative. Employee suggestions on how to maximise profits were treated with suspicion and on several occasions supervisors had taken the credit for ideas which were passed on by junior staff. A training and development adviser has been hired to open channels of communication through a series of training seminars.

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(a) (i) Explain the importance of delegation and time management to a trainee manager.

(ii) Outline the steps in an effective decision making process. You may use a diagram to illustrate your answer.

(iii) Define these management styles:

• authoritarian/autocratic;

• participative/consultative; and

• laissez faire.

(iv) Effective management practices can include open channels of communication. Explain how open channels of communication can improve employer-employee relations.

(b) The business expanded into a new shopping centre. During the particularly busy set-up period, the manager employed two staff telling them that they would be employed for a month with the probability of permanency thereafter. At the end of the month he did not employ either person, although he acknowledged that they had both proved reliable employees. Discuss the moral and ethical issues involved in this issue.

(c) The adviser suggests that the business undertake a staff performance appraisal in order to assess individual employees. The employees are extremely anxious at this suggestion, believing management may use this exercise to reduce staff numbers. Discuss how the employees’ concerns may be addressed.

Links: Business Management, Management Styles & Theories, Criteria, 6, 8, 9 and 10

Suggested Answers:

(a) (i) Delegation: passing responsibility to lower employee levels.

Importance: motivational, sense of involvement, training purposes, group work.

Time management: allocation of tasks to use time effectively to meet deadlines.

Importance: development of organisational skills, ensuring that client needs are met, setting and meeting goals.

(ii) Briefly explain the steps, identified as:

• identify problem and causes

• gather relevant data

• generate possible solutions

• analyse each possible solution

• select best possible solution

• implement solution

• evaluate, refine and return to step 1 if necessary

(iii) Authoritarian/autocratic - Managers make all decisions with little or no employee input. Information travels in one direction - from the manager down. Employees have little opportunity for input and/or innovation.

Participative/consultative - A more team oriented management style, with team decision making involving management and staff. Information travels more freely, and hence employees have a greater sense of involvement, responsibility and input.

Laissez faire - Workers make day-to-day decisions with little management direction. There is little movement of information and decisions tend to be short-term rather than based on long-term goals.

(iv) Open channels of communication allow open discussion of aims and objectives, along with input on how to achieve these. Information travels between employer and employees, and this open communication is actively encouraged. It is likely to reduce conflict and provide all parties with commonly shared goals. Such communication fosters trust and honesty within the organisation, a sense of participation and ownership in organisational goals and is likely to improve staff morale.

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If there is a breakdown in communication, there may be confusion and conflict. Errors may be made. Effective feedback practices can be implemented, for example - all orders are confirmed, all e-mails are replied to, all suggestions are acknowledged.

(b) Possible topics of discussion:

• Employees may have turned down other positions for this one when the probability of permanence was suggested.

• Employees may have made a number of sacrifices in order to take the position, for example, relocation, purchase of appropriate clothing.

• The employees may have entered into financial commitments believing the jobs may be long term, for example, personal loan for a car to travel to and from work.

• Whilst the manager did not break the law, he did mislead the employees by indicating that permanence was a ‘probability’. By doing so, he may also lose the confidence and trust of the other employees and create a difficult work environment.

• Actions which are not illegal may be unethical.

(c) Possible topics of discussion:

• Management may clearly explain the process: why it has been proposed, what will occur and the time frame. For example, management’s main purpose may be to focus on the need for additional staff training to improve general performance levels.

• Involve employee representatives in the organisation and implementation of the appraisals in order to provide feedback to staff.

• Indicate how feedback will be communicated to employees, so that it becomes a learning experience for all parties.

Case Study 17

In 1994, the World Economic Forum’s World Competitiveness Report ranked Australia 15 out of 41 countries using their eight key measures of performance: domestic economic strength, international performance, government, finance, infrastructure, management, science and technology, and human resources.

Australia was ranked behind such nations as New Zealand (9), Singapore (2), The Netherlands (8), the USA (1), and the United Kingdom (14). Australia did not score well on management and rated poorly on entrepreneurship and innovation.

(a) (i) Distinguish between domestic and international performance.

(ii) Explain how innovation may aid in the management planning process.

(iii) Define the following terms:

• entrepreneurship

• human resources management

• infrastructure

(iv) Explain how information technology may contribute to world competitiveness.

(b) 1995 Task Force Research by Barraclough & Co listed honesty, ethics, egalitarianism and high personal standards as management strengths. Using specific examples, explain how management should demonstrate these attributes in the workplace.

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(c) The World Economic Forum’s Report also indicated that management in the average Australian enterprise is not as skilled in its role as the workers they manage are in theirs. Under these circumstances, is an autocratic, persuasive or participative management style most likely to be effective? Explain your answer.

Links: Business Management, Australian Business Sector, Australia in the Global Economy, Criteria 6, 8, 9 and 10

Suggested Answers:

(a) (i) Domestic economic performance – internal economy, i.e. within a country’s borders. Common measure is GDP. International economic performance – includes economic relationships with other countries,

e.g. exports to and imports from other countries. May refer to Gross National Expenditure = GDP+M-X

(ii) Innovation involves developing new products and services to meet new needs and wants, or devising new methods to meet existing needs and wants.

(iii) Entrepreneurship involves undertaking risks to create and develop new business opportunities. Human resource management involves ensuring that employees achieve their maximum performance levels to fulfil the aims, goals and objectives of the organisation. Infrastructure refers to supportive, structural resources such as highways, transport and other public utilities.

(iv) Information technology is high speed communication (telecommunication), ability to store, manipulate and retrieve large amounts of data at high speed.

(b) The management strengths listed can be evident in the following ways: Egalitarianism (all employees have opportunities for skill development, promotion, input, etc); Honesty (human resource processes are not designed to mislead employees, e.g. performance appraisals give frank yet constructive feedback on employee performance); Ethics (display high standard of personal and professional conduct as a model for employees); High Personal Standards (don’t expect a standard from employees which management is not able to demonstrate)

(c) Participative management style – involves employees participating in the decision making processes and allows input. Advantages include: several heads are better than one, a consensus decision is likely to be carried out more enthusiastically, and it helps develop staff skills and is effective on the job training fro future managers.

Case Study 18

The Federal Government has, for some years, advocated the principle of privatisation of government business enterprises (GBEs), eg. Telstra. This has met with some resistance from community groups who believe that certain GBEs providing what might be classified as essential services should remain under government control. This issue has become particularly controversial since privatisation has been linked to a loss of jobs and services in rural areas of Australia which are struggling to survive in a changing economic environment.

(a) (i) Distinguish between a public company and a private company.

(ii) Explain how a GBE could become privately owned. Use an example to illustrate your answer.


• privatisation

• shareholder

• dividends

(iv) Explain the importance of accurately identifying costs when determining the selling price of a product.

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(b) A partially privatised business has recorded a record profit. When the Chairman of that business calls a press conference to announce this record profit, he also informs the public that the business is planning to cut its workforce by 20% and increase charges by 10%. The announcement causes public outrage and is labelled as ‘unethical and immoral’ by members of the media. A consumers’ association calls for the resignation of the Chairman.

Discuss the moral and ethical issues involved and explain why you believe the Chairman has been attacked.

(c) The Chairman calls an emergency meeting of the Board. He is shocked by the reaction to his announcement (detailed in Part II above) and seeks the advice of board members on his next move. Briefly discuss two possible strategies to counter the damage caused to the public relations image of the business.

Links: Business Management, The Basics of Business Economics + Public Relations, Public Relations, Criteria 6, 8, 9 and 10

Suggested Answers:

(a) (i) A company is a form of corporation recognised by law as having a legal personality distinct from its owners. A public company offers its shares and other securities to the public via the ASX and use Ltd or Limited in its name. A private company uses Pty Ltd or Proprietary Limited after its name and its shares are not available to the general public. These companies are more likely to be, or have grown from, family businesses.

(ii) A publicly owned business can change ownership by a partial or full sale, the aim being to allow the organisation to become more competitive and efficient. The sales can be achieved by selling shares via the ASX so that they may be purchases by individuals or other organisation.

(iii) Privatisation involves transferring activities previously performed by government departments to private enterprise. Shareholders own shares or units in the share capital of a company and may have a right to dividends, voting rights and/or rights to participate in the distribution of any surplus on winding up. Dividends are the profits of a company distributed to shareholders in cash or other property.

(v) It is important to identify all costs (fixed and variable) incurred in producing a product. If the selling price is greater than the total costs, a profit will be made. If less, a loss will occur.

(b) Privatisation is a contentious issue. Many argue that some functions, for example, the postal service, should be run by the government due to social and political issues. And increased efficiency is often achieved by reducing staff numbers and closing branches in less profitable areas and often at the expense of local communities. The Chairman of the partially privatised business may be regarded as putting shareholder interests ahead of consumer needs and risking reduced services and higher charges despite the record profit. As the CEO he is the figurehead and therefore the target for criticism. To make employees redundant at a time of record profit is particularly regarded as immoral and unethical.

(c) Any strategy needs to be seen as effective and beneficial to consumers if it is to allay their concerns. The Chairman may choose to

• Outline other, less attractive options the Board could have considered in order to achieve the same savings

• Explain the longer-term benefits of these unpopular proposals • Give an overview of what might eventuate if these measures are not put in place.

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Case Study 19

A national company is proposing to establish a waste facility in the industrial area at Bell Bay, northern Tasmania. The facility would handle industrial waste which would arrive either by truck or by train. Opponents to the scheme believe it is not environmentally desirable to transport waste to a central facility as it could pose a hazard to human health and the environment. Local farmers and aquaculture business operators are also concerned that there may be run-off into local water supplies, resulting in the loss of the ‘clean, green’ image they have worked hard to establish.

(a) (i) Explain why the company planning to establish the waste facility may face a public relations problem.

(ii) Outline the four main techniques the company needs to use in conducting a public relations campaign.


• publicity

• direct marketing

• personal selling

(iv) Explain why it is important to have an ongoing evaluation of the campaign.

(b) The Board of the company have commissioned two environmental impact studies for the site of the proposed waste facility. One reveals potential run-off problems affecting the surrounding rivers. The second does not reveal these problems. The Board decides to use the second impact study when seeking planning approval and chooses not to disclose the run-off problems.

Discuss the short-term and long-term moral and ethical implications of this decision.

(c) The area in which the company is seeking to establish the waste facility has an unemployment rate above the national average. The two unions which represent the tradespeople likely to be required for the running of the waste facility, seek a meeting with the management of the proposed waste facility to discuss possible employment opportunities and safety procedures.

Explain how cooperation with these unions may assist the company in their efforts to gain planning permission for the waste facility.

Links: Public Relations, Public Relations, Criteria 6, 8, 9 and 10

Suggested Answers:

(a) (i) The company faces a PR problem because it is proposing to establish a business which may pose a hazard to residents and other businesses. This negative perception of the business could affect its viability and image.

(ii) Four main techniques the company needs to use in conducting a PR campaign are:

• Image assessment – business finds out what public thinks (e.g. by survey) • Image plan – business identifies what it would like as an image and formulates ideas an

options • Image manipulation – put plan into action in community • Image evaluation – assess success or otherwise of the plan, modify if necessary and

maintain via periodic assessment

(iii) Publicity – unpaid forms of promotion, e.g. press releases, sample distribution, often closely related to PR and designed to keep business in the public eye; Direct marketing – a cost effective method of specifically targeting a small, select group with advertising because it specifically reaches a select group of people; and Personal selling – a selling technique where salespeople have direct communication with the customer, e.g. over the counter, over the telephone or door-to-door, and can provide direct assistance to the customer.

(b) In the short term the company is more likely to gain approval for a facility without run-off problems. However if the contents of the EIS becomes known to the public, or the run-off does occur, the long term effects on the

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company image and clean-up costs could be very costly. Ignoring these potential problems is morally and ethically incorrect and the company would not be seen as a responsible corporate citizen.

(c) Cooperation with the 2 unions may assist the company to gain planning permission for the waste policy by • Promoting work opportunities in the community • Gaining valuable publicity for the proposed facility • Being seen as a cooperative and responsible employer • Working in a harmonious relationship with others.

Case Study 20

The economic environment – unemployment, interest rates, taxes, inflation and the standard of living – are factors that influence business. Under some circumstances businesses find it difficult to perform well because some sectors of the community are unwilling to spend at the same levels they would do if circumstances changed. Below are comparative profit and loss statements for a service business for the years ending 30 June 1999 and 2000.

Profit and Loss Statement Years Ending 30 June 1999 and 2000

1999

($)

2000

($)

Cash Sales 90 000 98 000

Credit Sales 125 000 100 000

TOTAL SALES 215 000 198 000

LESS EXPENSES

General and Administrative 50 000 48 000

Selling and Distribution 45 000 40 000

Interest 12 000 18 000

TOTAL EXPENSES 107 000 106 000

NET PROFIT 108 000 92 000

(a) (i) Distinguish between cash sales and credit sales.

(ii) Explain two differences between trading and service businesses.


• revenue

• expenses

• accounting period

(iv) Explain how comparing profit and loss statements over a number of accounting periods may assist management in assessing performance.

(b) The Manager of the business is aware that some cash transactions are easy to conceal from the Australian Taxation Office. She therefore keeps a second cash receipts book where she records cash transactions which do not appear in the profit and loss statement and are not disclosed for tax purposes, including Goods and Services Tax (GST).

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Discuss the moral and ethical issues involved in this behaviour and their implications for management.

(c) Compare the profit and loss statements above. Discuss two changes in business performance which may have been caused by economic conditions outside of the control of the business.

Links: Business Management, Financial Reporting for Business, Criteria 6, 8, 9 and 10

Suggested Answers:

(a) (i) When a cash sale occurs the business receives cash at the time of purchase, and the source document issued by the business is generally a cash receipt. At the time of a credit sales the buyer agrees to pay for the purchase in the future, the amount is recorded by the vendor in the accounts receivable and the source document is normally an invoice issued by the seller.

(ii) Trading businesses buy goods for resale at a profit, whereas service businesses provide a service for a particular price (e.g. hairdresser, electrical repairer). They also record a gross profit (sales less costs of goods sold) and a net profit (which takes into account other revenues and expenses). A service business records a net profit only (revenues less expenses).

(iii) Revenue – the inflow of resources resulting from the sale of stock, services performed and/or general operations of the business. Expenses – the outflow of resources resulting from the purchases of stock, services consumed and/or general operations of the business. Accounting period – the life of a business is divided into arbitrary time periods, usually the financial year, which allows the periodic calculation of revenue, expenses, profit/loss, measurement of financial performance and evaluation of financial position.

(b) Moral and ethical issues • Understatement of revenue to owners and the ATO • Concealing of transactions from owners • Not passing on government income (GST) paid by customers

Implications for management:

• Loss of job for manager • Legal action against manager and business, possible resulting in a gaol term, heavy fines and other

penalties

(c) An increase in the cost of borrowing for the business (interest expenses have increased from $12000 (in the year ending 30/6/99) to $18000 (in the year ending 30/6/2000) An increase in interest rates may also have caused the drop in the dollar amount of credit sales ($125000 in 1999 to $100000 in 2000). Although cash sales have increased ($90000 in 1999 to $98000 in 2000) this does not compensate for the loss in credit sales. This could be attributed to another change in the economic environment, e.g. increased unemployment leading to a fall in spending in the community.

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