Lecture notes Business management

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HSC Business Studies 2005 Adam M. Brimo HSC Business Studies Adam M. Brimo Marcellin College Randwick HSC 2005 Page 1 of 47HSC Business Studies 2005 Adam M. Brimo Business Management and Change The Nature of Managemen Importance of e"ective management • Society could not function without some form of business management or organisation. Managers must e"ectively and eciently meet the goals of the business. Management Roles • Functions plan, lead, organise, coordinate and control • Interpersonal Figurehead, liaison, leader • Information Monitor, information disseminator, spokesperson • Decisional Entrepreneur, disturbance handler, recourse allocator, negotiator • Skills of Management • People skills, strategic thinking, vision, %exibility, selfmanaging, teamwork, problem solv • ing and decision making Responsibility to Stakeholders • Managing change, social justice, ecological sustainability, compliance with the law and • reconciling con%icts of interest. Understanding Business Organisations and Management Theories Management Theories • Classical Scienti&c • Emphasises the best way to organise work more eciently so to improve productivity. • Studies the job in order to &nd the best way to perform it. Emphasises extensive and rigid rules and regulations based on the hierarchy of authority. Small spans of control • One way communication channels • Well de&ned management hierarchy • High level of direction • Little or no participation in decision making by employees • Behavioural • Productivity can be improved if managers pay more attention to psychological factors • and social factors a"ecting employees Work can be satisfying • Employees can be self motivated and self directed • Groups of workers need to interact and develop a sense of belonging • Structure for two way communication channels • Democratic decision making process • Flatter management structures • Sta" involvement in planning process • Political • Five types of power; legitimate, expert, referent, reward and coercive • Emphasises negotiation and bargaining • Emphasises the need for business to understand the di"erent groups within a business • and the owner and politics that each group uses and possess. Stakeholder view involves identifying all parties that could be a"ected by the busi • ness's performance and decisions. Page 2 of 47HSC Business Studies 2005 Adam M. Brimo Strengths and Weaknesses of Management Theories • Classical Scienti&c • Strengths • Ecient on specialised tasks • Total control of the business • Skilled employees and highly ordered • Clear roles and responsibilities • Weaknesses • Little input from sta" • Low morale of workers • Employees may rebel or strike • Dicult to adapt to change • Behavioural • Strengths • Work becomes satisfying • Good communication channels • Workers get sense of responsibility • Support for employees and intrinsic motivation • Weaknesses • Not focused on eciency • Employees can take advantage of freedom • Results are not always immediate • People change • Political • Strengths • Knowledge of business problems • Groups accomplish tasks quicker • Empowers employees • Explains powerbase • Provides a strategy and direction • Weaknesses • Possible loss of focus on business objectives • Harder for managers to control business • Does not change power relationships • Managing Chang" Nature and Sources of Change • External Factors • Changing nature of markets, globalisation, communications, lower transport costs, • and unrestricted trade turn the world into a single global market producing a more integrated global economic system. Downsizing leads to workplace sta" reductions thus eliminating jobs. Economic In%uences %uctuating of the economy on a national basis is macroeco • nomics, Individual components of economy dealt with in isolation is microeconomics. Financial Markets deregulation of &nancial markets and globalisation allow business • to access &nance worldwide. Geographical in%uences • Social In%uences environmental concerns, ageing population, healthy lifestyles • Legal in%uences regulations and deregulation • Political In%uences frequent elections cause instability • Page 3 of 47HSC Business Studies 2005 Adam M. Brimo Technological in%uences • Internal Factors • Technological developments changes to training and development and job design • New systems and procedures worlds best practices • New business cultures the vision of managers, the need for new business cultures • Structural responses to change • Outsourcing the contraction of some business operations to outside suppliers • Flat structures improve communications and more responsibility and accountability • transferred to sta" Strategic alliances tow or more businesses join together and pool resources • Network structures provide administrative control for another business or a set of • businesses that perform all functions needed to produce and sell the product. Reasons for Resistance to Change • Financial Costs purchasing new equipment and technology, redundancy payouts for • employees who are retrenched, retraining of employees and reorganising of the plant lay out. Inertia of manager and owners unenthusiastic response to change. • Cultural incompatibility in mergers culture clash may results when two companies come • together. Stang • Deskilling employees are no longer able to perform skilled tasks due to changes in • work methods. Acquiring new skills due to changing work methods • Loss of career prospects • Managing Change E"ectively • Identifying the need for change done using SWOT analysis, &nancial statements • Setting achievable goals requires information and communication • Creating a culture of change done using change agents and the development of teams • Change Models • Force Field Analysis • Driving and restraining forces are identi&ed and restraining forced are minimised • and weighed against driving forces. UnfreeChangeRefreeze • The need is explained and the business is prepared for the change, then the busi • ness is refrozen after the change is implemented. Change and Social Responsibility Business awareness of its actions and their respective consequences. • Ecological Sustainability • Quality of working life and consideration of physical environment • Technology including the changes in communication methods • Globalisation / diversity equal opportunity employment, honouring of customs and tradi • tions Ecommerce privacy issues and the responsible use of the internet • Page 4 of 47HSC Business Studies 2005 Adam M. Brimo Financial Planning and Management Role of Financial Planning The Role of Financial Management • Financial planners must estimate the cost of business activities, cost and allocate re • sources and make decisions on funding options. Objectives of Financial Management • Increase dividends to shareholders • Maintain environmentally friendly organisation • Prepare &nancial reports • Main roles: liquidity, pro&tability, eciency, growth and return on capital • The Planning Cycle • Addressing the present &nancial position • Determining the &nancial elements of the business plan balance sheet, ratios, etc. • Developing budgets statement of resources allocated to speci&c areas in the business • Planning cash %ows forecast in%ows and out%ows to ensure debts can be paid • Preparing &nancial reports • Interpreting &nancial reports • Maintaining record systems mechanism used to ensure all data is accurate, reliable and • ecient. Planning &nancial controls • Minimising risk and loss • Financial Markets Relevant to Business Financial Needs Major Participants in Financial Markets • Banks largest provider of funds to businesses • Finance companies get funds by issuing debentures to the public, provide short to me • dium terms funds to business. Insurance companies provide payment if a future event occurs • Merchant banks get funds from short term borrowing, lends mainly to large corps. • Superannuation get funds from people preparing for retirement • Companies have surplus funds from operations and invest funds into money market • Government ensures gaps in supply of funds are &lled • Role of the Australian Stock Exchange • Allows new businesses to raise necessary capital • Designed for individuals and institutions to invest their savings • Allows businesses to exchange ownership of other businesses • Governed by uniform rules and regulations • Overseas and Domestic Market In%uences • Technological developments • Globalisation of &nancial markets • Taxation, GST, capital gains tax • Commodity prices • Risk management securities • Share ownership & accounting standards • Page 5 of 47HSC Business Studies 2005 Adam M. Brimo Management of Funds Sources of Funds • Internal • Owners equity funds contributed by the owners of the business • Retained pro&t all pro&t kept within the business • External • Bank overdraft bank allows the business to exceed their current balance up to a cer • tain agreed level Bank bills bill of exchange given for large amounts in short term • Mortgages loan secured by the property of the borrowers • Debentures issued by a company for a &xed amount and a &xed rate of interest • Leasing involves payment of money for use of equipment owned by another party • Factoring Selling of accounts receivable for a discounted price to a &nance company • Venture capital funds supplied by private investment org for innovative / new ideas • Grants funds given by the government to promote business and ideas • Financial Considerations • Setup costs • Interest costs • Availability of funds • Flexibility of funds • Level of external control • Match the terms and source of &nance to the business purpose and structure • Debt and Equity Financing • Short term debt expenditure by short term &nance • Long term &nance funded by long term &nance • Debt &nancing • Provides tax deductible interest payments • Loan has to be repaid • Provider of &nance don't own part of the business • Equity &nancing • No interest payable • NonTaxDeductible payments must be made • Providers of &nance own part of business • Using Financial Informatio The Accounting Framework • Provides most of the information for the decision making process • Financial statements • Revenue statement summarises the activities of an organisation over a period of • time, showing operating results and revenue. Balance sheet represents an organisation's assets and liabilities at a point in time • Accounting equation shows the relationship between assets, liabilities and owners eq • uity. Assets = Liabilities + Owners Equity Types of Financial Ratios • Liquidity the ability of an organisation to pay its debts as they fall due • Page 6 of 47HSC Business Studies 2005 Adam M. Brimo Current Ratio = Current Assets / Current Liabilities Solvency the extent to which the business can meet it's long term &nancial commit • ments Debt to Equity = Total Liabilities / Owners Equity Pro&tability the economic performance of a business and indicates the capacity to use • it's resources to maximise pro&t. Gross Pro&t Ratio = Gross Pro&t / Revenue Net Pro&t Ratio = Net Pro&t / Revenue Return on Equity = Net Pro&t (After Tax) / Owners Equity Eciency The ability of a &rm to use it's resources e"ectively in ensuring the &nancial • stability and pro&tability of the business. Expense Ratio = Expenses / Revenue AR Turnover Ratio = 365 / ( Revenue / AR ) Comparative Ratio Analysis • Used to indicate trends, strengths, weaknesses and relationships between &nancial items • Time comparison compares current period to prior &nancial periods • Industry average business results are compared to industry averages • Limitations of Financial Reports • Historical costs process of valuing the business assets by their cost at the time the • transaction took place Value of intangibles rights, rather than objects, not generally recorded on the balance • sheets unless the business has been or will be purchased. Eective Working Capital %Liquidity& Managemen Working Capital Ratio • WC Ratio = Current Assets / Current Liabilities Control of Current Assets • Cash controlled using budgets, which detail expected in%ows and out%ows • Accounts receivable controlled using credit checks on borrowers, and o"er incentives for • early payment while using factoring as a last resort. Inventory controlled by detailing acceptable inventory policies or JIT if suited. • Control of Current Liabilities • Accounts payable are controlled by paying as late as possible and choosing suppliers care • fully Incorrect use of overdrafts can cost money in high interest payments • Short term loans should be controlled by planning borrowing carefully and &nding alter • nate sources of &nance. Strategies for Managing Working Capital • Leasing hiring of an asset owned by another company or person who has purchased the • asset and retains ownership. Page 7 of 47HSC Business Studies 2005 Adam M. Brimo Factoring Improves working capital by selling accounts receivable to a third party • Sale and lease back selling an asset to a lessor and leasing it back through &xed pay • ments. Eective Financial Planning E"ective Cash Flow Management • Cash %ow statements &nancial statements indicating the %ow of cash resulting from • transactions Management Strategies • Distributing of payments involves spreading payments over a period of time to coin • cide with surpluses of cash Discounts for early payments business provides a percentage reduction from the • purchase price if the buyer pays within a certain period of time. E"ective Pro&tability Management • Cost Control • Cost centres departments in a business to which costs can be directly attributed • Expense minimisation improves competitive position of the business while main • taining production levels, e.g.. downsizing. Revenue Controls • Sales objectives set objectives in revenue budgets by forecasting sales • Sales mix the range of products o"ered for sale, &nancial managers need to analyse • the breakdown and contribution margins for each product. Pricing policy The aim is to protect or increase market share while meeting pro&t • ability objectives, managers have to ensure products are correctly priced. Ethical and Legal Aspects Audited Accounts • Independent check of the accuracy of &nancial reports / records and accounting proce • dures Inappropriate Cut O" Periods • A business incorrectly matches the period in which revenues occur with when major out • %ows occur Misuse of Funds • Business funds are used for purposes other than originally delegated • Australian Securities and Exchange Commission • Enforces and administers corporations law and protects consumers in the areas of in • vestments, superannuation, life insurance, etc. Corporate Raiders • The process of buying an undervalued company and increasing pro&t or selling o" the • businesses assets. Page 8 of 47HSC Business Studies 2005 Adam M. Brimo Marketing Nature and Role of Markets and Marketing Role of Marketing • Market Penetration Selling more of an existing product in an existing market place by • attracting customers of competitors. Market Development Selling an existing product or service to new customers through • new locations. Product Development Selling a new or improved product to existing customers • Diversi&cation Move into new line of business with new products, selling to new cus • tomers. Types of Markets • Resource buying and selling of all forms of primary production • Industrial purchase of products for use in production and other products • Intermediate wholesalers and retailers who purchase &nished products for resale • Consumer Individuals who use the products they buy • Mass the seller mass produces, mass distributes and mass promotes one product to all • buyers Niche created when the mass market is &nely divided into smaller markets • ProductionSellingMarketing Orientation • Production Approach 1820s 1920s taking orders and delivering goods, demand for • goods is greater than supply. Selling Approach 1920s 1960s advertising and personal selling, demand is less strong • and emphasises on selling goods Marketing Approach 1960s present coordinated e"orts aimed at satisfying customers • needs, emphasises on marketing products and customer relationships. Marketing Concept • Business philosophy stating that all sections of the business are involved in satisfying a • customer's needs and wants while achieving the businesses goals. Customer Orientation occurs when a business bases it's marketing decisions and prac • tices on customer wants. Relationship Marketing The developing of long term and cost e"ective relationships • with individual customers Marketing Planning Process • System for organising the marketing of a &rm through clear objectives, decisions, or • strategies, actions and budgets for expenditure and revenue. Contents of a marketing plan • Executive summary • Analysis of research • Plan, including objectives, strategies, &nancial analysis, control structure • Elements of a Marketing Pla Situational Analysis • SWOT analysis • Two questions must be answered • Page 9 of 47HSC Business Studies 2005 Adam M. Brimo Where is the business now? • Where will the business be in the future? • Establishing Marketing Objectives • Increasing market share • Increasing geographical expansion • Targets may be di"erentiated by total and speci&c performance targets • Identifying the Target Market • Segments at which the whole marketing process is to be directed • Niche market • Multiple segment market • Undi"erentiated mass market • Market Potential total expected sales of a product by all sellers over time • Sales Potential potential market share for a particular &rm • Sales response function relationship between marketing expenditure and increases in • sales revenue. Developing Marketing Strategies • Product brand name, packaging, positioning • Price list price, discounts, credit terms • Promotion advertising, sales promotion • Place location of markets, distribution • Implementation, Monitoring and Controlling • Regulatory Requirements Business activity takes place within the context of regulations, • the purpose of legislation is to: Protect consumers from unfair business activities • Protect businesses from unfair attempts to reduce competition • Protect long term interest of society • Current trading and product performance indicated by measures of pro&t, market share, • promotion results. Financial Strengths determines method of distribution, products may be deleted instead • of renewing interest through expensive marketing campaigns Assets base expensive assets operating below capacity may encourage attempts to in • crease their usage through promotion or varying the product mix. Monitor and modify After implementation of the marketing plan, management should • compare planned and actual results with emphasis on &nancial costs and bene&ts. Market Research Process Determining Information Needs • Information must be relevant to the situation or problem • Information is useful if: • Results in marketing strategies that meet the needs of the business's target market • Assists the business to achieve it's marketing objectives • May be used to increase sales and pro&ts • Data Collection • Marketing data information, usually expressed as facts and &gures, relevant to the de • &ned marketing problem Page 10 of 47HSC Business Studies 2005 Adam M. Brimo Primary data facts and &gures collected from original sources for the purpose of the • speci&c research problem, three main methods: Survey • Observation • Experimentation • Secondary data information which already been collected by some other person or or • ganisation Internal data information which has already been collected from inside the business • External data published data from outside the business • Data Analysis and Interpretation • Drawing conclusions from data • Statistical interpretation analysis the process of focusing on the data that represents av • erage, typical, or deviations from typical patterns Interpretation is largely based on the marketers judgement, experience and intuition. • Customer and Buyer Behaviour Types of Customers • Individuals • Households • Firms retail businesses, manufacturers & service providers • Educational institutions • Government • Clubs and Societies • Religious organisations • The Buying Process • Need Recognition Search for Information Purchase Evaluate Alternatives Evaluate After Purchase Buyer individual or group who purchases the product • User Individual or group who uses the product • Factors In%uencing Consumer Choice • Psychological • In%uences within the individual • Perception, motives, attitudes and personality • Sociocultural • Forces exerted by other people and groups that a"ect customer behaviour • Peer or reference groups • Social class, culture and subculture • Economic • Changes in real income the amount a level of income will buy • Changes in in%ation and unemployment in%ation is measured through the consumer • price index, in%ation refers to the sustained increase in the general price level over time. Page 11 of 47HSC Business Studies 2005 Adam M. Brimo Government • Governments implement economic policies designed to expand or contract the level • of economic activity depending on current conditions. Developing Marketing Strategies Market Segmentation • Segments of a market are identi&ed and evaluated • Total market can be broken down into segments based on: • Demographic • Psychographic • Geographic • Product Di"erentiation • Process of developing and promoting di"erences between the business products and • those of its competitors Product and Service • Positioning • Developing of a products image as compared with the image of competing products • Branding • Name, term, symbol or design, or any combination of these that identi&es a speci&c • product and distinguishes it from the competition. National / manufacturers brands are those owned by the manufacturer • Private or house brand owned by a retailer or wholesaler • Generic brands products with no brand name at all • Packaging involves the development of a container and the graphic design for a • product Price and Pricing Methods • Pricing Methods • Cost plus margin total cost of production determined then pro&t is added • Market pricing prices are set according of the level of supply and demand • Competition based price directly related to the prices of competitors producing • similar products Pricing Strategies • Price skimming highest price possible charged for innovative products • Price penetration lowest possible price charged, used to quickly gain market share • Loss leader products sold below cost price in order to attract people to a store • Price lining also called price points, it is used mainly by retailers it is where the • business sets lines of products at key prices Price and Quality Interaction • Normally products of superior quality are sold at higher prices due to increased pro • duction costs. Therefore people associate a higher price with higher quality or pres tige, the converse is also true. Promotion • Elements of the Promotion Mix • Personal selling activities of the sales person in%uencing the sale • Advertising paid form of nonpersonal presentations • Page 12 of 47HSC Business Studies 2005 Adam M. Brimo Below the line promotion promotional activities for which the business does not • make use of an advertising agency Public relations maintaining a favourable image between the customer • Communications Process • Opinion leaders when a person of status endorses a product • Word of mouth people giving their opinions of products • Place / Distribution • Distribution Channels • Linkage between the producer or supplier and the customer • Producer to customer no intermediaries, most sources use this method • Producer to retailer to customer retailer buys from producer and sells to customer • Producer to wholesaler to retailer to customer most common method for consumer • goods, wholesalers buy in bulk Producer to agent to wholesaler to retailer to customer agent distributes products to • wholesalers Channel Choice • Intensive product made as widely available as possible • Selective only a few channels are used and availability is limited • Exclusive only one distributor of the product • Direct selling directly to the consumer • Physical Distribution Issues • Transport aims to deliver the right goods to the right people at the right time in the • right quantities Warehousing Set of activities involved in receiving, storing, and dispatching goods • Inventory control a system that maintains quantities and varieties of products ap • propriate for the target market Environmental E"ects on Distribution • Technology • Nonstore retailing retail activity conducted away from the traditional store • Telemarketing use of a telephone to make a sale • Internet marketing use of the world wide web for promotion and sales • Local Governments • Businesses feel overregulated, business must ful&l all obligations to government or • ganisations. Ethical and Legal Aspects Environmentally Responsible Products • Environmentalism the organised movement of concerned businesses, consumers and • government agencies to protect and improve the physical environment People are more concerned with quality of life and the physical environment • Other Issues • Creation of needs marketing may have contributed to the creation of our materialistic • society Impact of Retail Developments • Linking of direct marketing and electronic databases • Automated checkout scanning systems that do not require an operator • Use of instore television presentations • Page 13 of 47HSC Business Studies 2005 Adam M. Brimo Provision of internet ordering systems • Transformation of shopping malls into entertainment centres • Sugging selling under the guise of research, a sales technique disguised as market re • search Role of Consumer Laws • Deceptive and misleading advertising is constrained by the trade practices act 74 • Bait and switch advertising advertising products at reduced prices then the consumer is • enticed to purchase higher priced items. Price discrimination setting of di"erent prices in separate markets • Implied conditions unwritten and unspoken terms of a contract, they are assumed to • exist Merchantable quality • Fitness of purpose • Warranties promise of the business to replace or repair the product • Resale price maintenance manufacturer or supplier insists the retailer sell the product at • a certain price Page 14 of 47HSC Business Studies 2005 Adam M. Brimo Employment Relations The Nature of Employment Relations Stakeholders in the Employment Process • Employers • 2.4 million businesses in Australia, 880,000 of which employ people • Employees • 7.3 million employees in Australia • Employer Associations • Formed to: • Counteract activities of unions • Represent employers at negotiations and tribunal hearings • O"er advisory services concerning awards and industrial relations • Organisational Structures • Industry Associations • Autonomous found in larger industries of banking, mining and manufacturing • semiautonomous employ full time sta" who as as jack of all trades' • Dependent do not employ sta", rather rely on another organisation for secre • tarial and specialist services Umbrella Associations • Take membership from any industry • Trade Unions • An association of employees in a particular industry or occupation which aims to im • prove wages and working conditions. Government • Managing the Employment Relations Function • Line managers responsible for the management of sta" contributing to the prime func • tion of the business Specialist managers responsible for recruitment. selection and induction, managing and • implementation of legislation Key In'uences on Employment Relations Social In%uences • Changing work patterns jobs are no longer for life, changes driven by the need to reduce • costs, people today may have periods of full time work followed by periods of part time work, many businesses hire more casual workers. Population shifts the number of females in the workplace is increasing, thus businesses • are realising the bene&t of family friendly workplaces Changing attitudes todays workforce is well educated and employees increasingly want • challenging work, greater responsibility and autonomy Legal In%uences • Contracts between employees and employers • Common law governs such things as leave and holidays • Federal acts help enforce common and statute law • Superannuation Guarantee Act 92 • Industrial agreements include awards, enterprise agreements and workplace agreements • New Organisational Behavioural In%uences • Page 15 of 47HSC Business Studies 2005 Adam M. Brimo Flat Management and Team Structures • Allows workers to develop a shared identity with the commitment to the goals of the • &rm. Flatter structures allow for more responsive and adaptable management structures • and networks of self managing teams which encourages innovation, improved produc tivity and greater eciency. Job enlargement involves increasing the breadth of tasks in a job • Job rotation moving of sta" from one task to another over time • Job enrichment involves increasing the responsibilities of a sta" member • Economic In%uences • Economic cycle demand for labour determined by demand for goods and services in the • economy, changes to taxation also a"ect business activities. Structural change changes in the pattern and composition of production and unem • ployment in an economy such as the rapid growth of the services sector which accounts for 70+ of workers. Globalisation • The combined, cumulative expression of trade, investment, &nance and labour on a • global scale Businesses must manage diverse workforces across countries • Some businesses have standardised employment packages for all countries • ILO and trade blocs promote trade between countries which adhere to social justice • principles Eective Employment Relations Role of Employment Relations • To manage the relationship between employer and employees e"ectively in order to de • velop competent, %exible, productive employees committed to the organisation. Communications Systems • Methods of Communication • Daily walkaround by managers • Regular meetings • Sta" bulletins and newsletters • Suggestion boxes and surveys of sta" • Use of email • Grievance Procedures • Mainly used to deal with personality con%icts and disciplinary matters • They provide an avenue for both employers and employees to settle disputes arising in • the workplace. Worker Participation • The consulting of workers in the making of decisions that are normally made by man • agement alone Team Brie&ngs • Utilising the skills of workers by placing them in semiautonomous workgroups • Rewards • Intrinsic those that the individual derives from the task or job itself such as a sense of • achievement Extrinsic rewards given outside the job itself, they may be monetary or nonmonetary • Monetary rewards with a direct &nancial value • Page 16 of 47HSC Business Studies 2005 Adam M. Brimo Nonmonetary rewards such as employee satisfaction, decision making power and • autonomy in the workplace Training and Development • Aim of training is to seek a long term change in employees skills, knowledge, attitudes • and behaviour in order to improve work performance. Induction introduces the worker to the job, coworkers, organisation and it's culture. • The majority of employees who leave, do so in the &rst three months. Training programs designed to keep employees up to date with the business and it's en • vironment. Five steps include: 1. Access to needs of all parties, this includes performance appraisals 2. Determine the objectives of the training program 3. Consider internal and external in%uences 4. Determine the process of training 5. Evaluate the training program Flexible Working Conditions • Ensures the satisfaction of all employees • Family friendly programs allow for employees to raise families and take time o" and still • remain in a job Measures of E"ectiveness • Levels of sta" turnover people may leave organisations for reasons such as low pay and • low morale, improving working conditions can help stop sta" from leaving the organisa tion. Absenteeism unhappy workers have higher levels of sick leave which disrupts operations • Disputation dissatis&ed workers are involved in more industrial disputes • Quality An emphasis on quality saves money since the costs of not making quality stan • dards a high priority include more rejects, more material costs, more management time checking and rectifying problems, poor customer relations and low productivity. Quality circles groups meet to examine ways of improving the quality of their output • Benchmarking • The use of standards to compare business products and services to industry standards • Best practices program the application of the best practices business goals and • methods, internal organisation and relations with suppliers and customers that form an integrated strategy for improving competitiveness. Legal Framework of Employmen The Employment Contract • Common Law • The law of employment is based on common law with many statutes modifying the • legal situation Two main types of employment contract • Contract of service employer has control over the employee and can dictate over • the employee and can dictate how the work is to be performed. Contract for service generally an agreement to perform a speci&ed task for a cer • tain sum of money Responsibilities of the Employer • Provide work • Payment of income and expenses • Page 17 of 47HSC Business Studies 2005 Adam M. Brimo Meet requirements of industrial relations legislation • Duty of care • Responsibilities of the Employee • Obey lawful and reasonable commands • use care and skill in work • Act in good faith and in the interests of the employer • Statutes • Laws made by the federal and state parliaments such as laws relating to employment • conditions, wage and salary determinations and dispute resolution. Awards • Legally binding agreements which set out minimum wages and conditions of employ • ees Cover over 80+ of all workers • Agreements • Workers are covered by certi&ed enterprise agreements or Australian workplace • agreements Certi&ed agreements are made between an employer and a union or valid majority of • employees Australian workplace agreements cover incorporated businesses and are for individual • employees Individual contracts exist when an employer and an individual employee negotiate a • contract covering pay. Type of Employment Contract • Casual employees hired for as long as services are required • Parttime employees work a proportion of the full time workload, contract usually • stipulates a maximum number of working hours Flexible employment conditions allows for job sharing and for businesses to operate • shifts at more intensive levels at peak times, with bene&ts such as longer holidays during slow times. Permanent regular or continuing employee can be full or parttime, required to work a • speci&ed number of hours per week and entitled to a range of entitlements Industrial Con'ic De&nition and Causes • Industrial relations the behaviour and interaction of people at work • Causes of Industrial Disputes • Wage demands wages are income to employees and a cost to the business • Working conditions refers to the organisational environment of the workplace in • cluding hours, amenities, and the physical environment. Management policies division of labour, sharing of tasks, alienation and new tech • nology Political goals ensuring a certain party wins or protests against our or foreign gov • ernments Social issues includes services and rewards which bene&t society • Perspectives on Con%ict • Unitary assumes that each work organisation is an integrated entity with a common • purpose or goal. Industrial relations based on mutual cooperation and a common goal. Page 18 of 47HSC Business Studies 2005 Adam M. Brimo Pluralist accepts the inevitability of con%icts as there are competing interest groups • within the business. Radical or Marxist sees worker and business relations as a class war and recognises in • herent con%icts while advocating an overthrough of the power base. Types of Industrial Action • Overt Action • Lockouts when employers close the entrance to a workplace and refuse to let work • ers in. Pickets protests which take place outside a workplace and are generally associated • with a strike Strike where workers withdraw their labour • Sympathy strikes those called in support of a group of workers • Rolling strikes occur over a period of time, in between working periods • Rotating and revolving strikes occurs when workers at di"erent locations take • turns to strike Political strikes taking action in response to political issues • Wildcat Strikes those which take place without union approval • General strikes involve a larger number of workers striking simultaneously • Stop work meetings involves workers stopping work to conduct a meeting • Work bans refusal to work overtime, handle a product or work with particular indi • viduals. Worktorule employees refuse to perform tasks not required in an award • Covert Action • Absenteeism dicult to distinguish from genuine sick leave • Sabotage malicious damage of equipment or production process • Turnover refers to the number of employees who leave work voluntarily • Exclusion from decision making decreases worker satisfaction as it achieves the op • posite reaction as worker participation Role of Stakeholders in Resolving Disputes • Workers and Management • resolution of industrial relations matters rest with employees and managers. Resolu • tion should take place at the lowest level and only proceed to industrial courts after all other avenues have been exhausted. Unions and Peal Union Organisations • At the state level trades and labour council • Federal level Australian Council of Trade Unions • Government and Industrial Tribunals • Industrial tribunals tried to control disputes and the parties involved. Government, • in turn have tried to regulate and control tribunals. Constitution guarantees auton omy for AIRD and have therefore, at times, been in con%ict. Dispute Resolution Process • 1. Conciliation involves bringing in an impartial third party to reconcile the dispute 2. Arbitration The settlement of a dispute through the decision of an independent third party 3. Grievance procedures agreed steps which should be taken when a dispute arises 4. Negotiation requires the parties to discuss the issues hence coming to an acceptable compromise agreement 5. Mediation involves a third party being involved to enter negotiations or collective bar gaining processes to assist in resolving the dispute. Page 19 of 47HSC Business Studies 2005 Adam M. Brimo 6. Common law action parties may make claims for damages resulting from disputes 7. Business / division closure closure of establishment may occur if no resolution is reached Costs and Bene&ts of Industrial Con%icts • Costs • Financial • Lost wages to employees • Lost pro&ts and contract to employers • Personal • Stress and associated health problems • Social • Bitterness, destruction, police action and disruption of lifestyle • Political • Action prior to elections can in%uence the voters • International • Loss of export markets because of higher costs and unreliability of suppliers • Bene&ts • Financial • Increases empowerment of all parties who have an agreement resulting in in • creased productivity Personal • Con%ict helps workers gain management's attention on bothersome issues • Social • Jobs can be saved and employees can gain new skills while OHS problems may be • reduced Political • Governments can change policy in response to workplace con%icts • International • Work practices following con%ict can increase competitiveness internationally • Ethical and Legal Aspects Issues in the Workplace • Working Conditions • Flexibility of leave • Rostered days o" • Extended or staggered hours of work • Job sharing • Part time employment • Occupational Health and Safety • Employers are responsible for providing a safe and healthy work environment • AntiDiscrimination • Ensures that no practice disadvantages a person or group because of a personal char • acteristic which is irrelevant to the performance of work Equal Employment Opportunities • Refers to the equitable practices in recruitment and selection • Unfair Dismissal • Occurs when dismissal was harsh, unjust or unconscionable • Reinstatement returning the employee to their old job • Compensation payment to the employee not exceeding six months wages • Page 20 of 47

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