HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 1

Pages of this document:

Finance: Pages 2-18

Operations: Pages 19- 34
Marketing: Pages 35-50
Human Resources: Pages: 51-71

When writing in Business Studies it is important that you not only tell your marker HOW strategies work but
also how WELL and HOW YOU KNOW THIS, eg increased sales, growth, increased profits. The table below will
be useful in supporting your claim that a particular strategy is effective. You should reproduce this table with
information about the major case study that you intend to write about (eg IKEA, Apple etc). The following
table relates to McDonald’s:

Brand Value: Named the 9th most valuable brand and more people in the world recognise
the ‘Golden arches’ logo than the Christian cross- 88% of the people
surveyed.
Sales: Annual revenue for 2020 was $5.888B, a 10.09% decline from 2019
Growth: More than 39,000 restaurants in more than 100 countries; net increase of
503 new restaurants worldwide between 2019-2020.
Net Profit: Decreased by 21.55% between 2019-2020 - $4.73 billion total net profit
(from $6.03B)
Market Share: 15.45% of the total informal eating out industry.
Competitor Market Share: Yum Brand (which operates KFC, Taco Bell and Pizza Hut) accounted for
6.83% of total informal eating out industry.
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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 2

FINANCE
Finance is about:
- Managing cash flows (in and out)
- Managing finances in the long and short term
- Financial reporting

Role of Financial Management

strategic role of financial – Determining the financial resources available → achieve goals and objectives of
management business
Strategic Role of Roles:
Financial Management: – Setting Financial Objectives – ensuring the are realistic
provide financial
resources → implement
– Sourcing Finance
of the business strategic – Preparing budgets and forecasting future finances
plan – Preparing financial statements
– Maintaining sufficient cash flow
– Distributing funds to other parts of the business

McDonald’s - The strategic goal of management is to achieve plans which span a number
of years. The Finance Director oversees the achievement of financial goals; “how assets
are deployed, how these assets are financed and the overall profitability of the company”
objectives of financial Liquidity
management - Business has enough cash to fund day-to-day activities
– profitability, - Quicker an asset can be turned into cash, the more liquid it is (bank account faster
growth, than investment property)
efficiency, Profitability
liquidity, - Money business makes from its operations after all expenses have been accounted
solvency for
- Maximising sales and minimising costs or expenses
Efficiency
- Maximise the return from its assets with minimal costs
- Achieve objectives without wasting any resources
- How quickly a business is turning over its stock or collecting outstanding debts –
keeping costs minimum
Growth
- Ability to expand activities: increased production, higher sales, expanded product
range
- Merging or acquiring another business (External Growth Strategy)
- Business can grow on its own by increasing physical capacity by increasing size,
strategies for increasing sales and revenue, increasing market share and expanding
overseas through exporting
Solvency
- Meet financial commitments in the longer term – important for owners, shareholders
and creditors as it indicates risk of investment
- Whether a business can repay amount that have been borrowed for investments in
capital
- This is measured through gearing
short-term and long-term Short-Term Financial Objectives
- Tactical (1-2 years) and operational (day-to-day)
- Reviewed regularly to see if targets are met and if resources are being used to the
best advantage
For Example: management goal is to achieve 15% increase in profit for the next 10 years,
tactical plan may be purchase of machinery, updating old equipment with new
technologies, expanding into new markets and providing new services
Long-Term Financial Objectives
- Strategic plans of a business
- Determined for a set period of time – broad goals (increasing profit or market share)
- Reviewed annually and require a series of short-term goals to assist in its
achievement
Conflicts between Long-Term (LT) and Short-Term (ST) Financial Objectives
- Conflicts between LT and ST goals can be growth (LT) but will come at the expense of

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 3

increased costs and gearing, lower overall profits in the short term
- LT goals such as expansion, research and development, investment in human and
physical resources conflict with short term obligations
Financial managers must constantly assess the achievement of objectives to satisfy as
many goals as possible
McDonald’s Objectives:
Liquidity- ↓(lower) this by returning cash to shareholders
Profitability-
- Consistently achieve around 68% gross profit
- Historically McDonald’s increases net profit by reducing general and
operating expenses – though in 2020 net profit reduced due to many stores
having reduced hours or being closed
Efficiency- expenses increased by 4% in 2020
Growth
- sales/revenue decreased by 10.9% from 2019-2020, however in 2021 the figure
showed an 8.7% increase from 2020
- increase the number of worldwide restaurants worldwide by 750 in 2019
Solvency- return equity to shareholders by 2016 to increase debt rather than equity

Revenue can be defined as the amount of money a company receives from its customers
in exchange for the sales of goods or services. Revenue is the top line item on an income
statement from which all costs and expenses are subtracted to arrive at net income.
interdependence with - Marketing, operations and human resources departments rely on financial managers
other key business to allocate them adequate funds
functions - Operations: purchase inputs and carry out their transformation processes
- Marketing: undertake the various forms of promotion
- Human Resources: pay employees
- Finance relies on operations to produce products, marketing to promote products
and human resources to manage staff
Liquidity – the Just in Time inventory method assists Apple with freeing up working
capital for future innovations.
influences on financial Retained Profits
management - Net profits kept in the business – profits not paid out as dividends to shareholders
internal sources of (reinvested back into the business)
finance
retained profits McDonalds – US $5.9 billion in 2018
Internal Sources of $3.3 billion was returned to shareholders via dividends
Finance: funds provided
by the owners of the
business (finance) or
from the outcomes of
business activities
(retained earnings)
external sources of Debt – Short-Term Borrowing
finance - Funds that will be repaid within 12 months
debt – short-term Overdraft
borrowing (overdraft, - Bank allows a business to overdraw its account to an agreed limit
commercial bills, - Helps with short term liquidity problems (for instance, seasonal decrease in sales)
factoring), - Costs are minimal and interest rates a low
External Sources of Commercial Bills
Finance: funds provided - Short-term loans issued by non-bank financial institutions for larger amounts (over
by sources outside the $100 000) for a period of usually between 30 to 180
business (banks, - Funds are received the sum immediately and promise to repay with interest in future
financial institutions or (full amount does not have to repaid until end of term)
financial intermediaries) - Secured against business assets and offer competitive interest rates
Factoring
Increase in risk for - sale of accounts receivable for a discounted price to a business that specialise in the
businesses using debt as collection of unpaid accounts (improve cash flow)
the interest and banks - Allows a business to receive cash immediately, saves time and resources associated
and governments have to with collection
be paid on top of the
principal borrowed

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 4

long-term borrowing Debt – Long-Term Borrowing

(mortgage, debentures, - Borrowed for longer than 12 months
unsecured notes, leasing) - For real estate, plant (office/factory) and equipment
Mortgage
- Finance property purchases such as new premises, a factory or office
- Repaid with interest through regular payments, over an agreed time
Debentures
- Promises made by businesses to repay money that has been lent to a business
- Issued by a company for a fixed rate of interest and period of time
- Used to raised funds from investors
- Companies that borrow money offer security to the lender on company assets
Unsecured Notes
- Loan from investors for a set period of time
- Not secured against the business assets – present the most risk to the investors in
the note (lender) – attracts a higher rate of interest than a secured note
Leasing
- Involves the payment of money (at regular intervals) for the use of equipment owned
by another party

equity – ordinary shares Equity Finance – Ordinary Shares

(new issues, rights - Purchase of shares by individuals – become part owners of a publicly listed
issues, placements, - Voting rights and payments called dividends
share purchase plans), - Value is determined by a company’s current of future performance
private equity New Issue
- Security that has been issued and sold for the first time on public market (Australian
Securities Exchange)
Rights Issue
- Privilege granted to shareholders to buy new shares in the same company
Placements
- Allotment of share made directly from the company to investors
- Additional shares are offered at a discount to special investors or institutions
Share Purchase Plans
- Offer to existing in a listed company to purchase more share in that company without
brokerage fees
- Can also be offered at a discount to the current market price
Equity – Private Equity
- Money invested in a private company not listed on ASE
Aim: raise capital to finance future expansion/investment of the business

External sources of Finance

Debt/equity
The majority of Apple’s $215 billion cash reserves are invested in long-term marketable
securities, which explains why Apple plans to go further into debt. Most of Apple’s cash
and securities are invested overseas; if Apple were to bring those back to the US it would
have to pay US taxes (93% of Apple’s cash reserves are overseas).
This explains why Apple has $53.2 billion in long term debt obligations in the United
States.
financial institutions, Banks
banks, investment banks, - Deposits from the public → loans out funds to individuals and businesses at higher
finance companies, interest rates
superannuation funds, - Financial services: EFTPOS, credit cards, overdrafts, loans, insurance
life insurance companies, Investment Banks
- Provide services in both borrowing and lending – to business sector
- Customise loans to suit the business’s specific needs
Financial Institutions: - Advise businesses on things such as mergers and takeovers – arrange overseas
collect funds and invest finance
them in financial assets - DO NOT take deposits from public
- Impose conditions when imposing loans: equity in business
- Trade in money, securities and financial futures, long-term finance for company
expansion, provide working capital and arrange project finance
Finance and Life Insurance Companies
- Non-bank institutions that offer loans to businesses
- Arrange commercial bills, leasing finance and debentures (some deal in factoring as
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well)
- Do not take deposits from the public
- Life insurance companies through selling life insurance policies - money received
from this is lent out to businesses at high interest rates
Initial Public Offerings (IPOs) are a key vehicle for incorporated companies to increase
their capital in the form of equity financing.

McDonald’s uses a range of bank financing and finance companies.

Apple promotes on their website “Apple Financing” for consumers to take advantage of
the GE CreditLine card. It is exclusive to Apple and issued by GE Capital Finance
Australia.
Apple Pay is a mobile payment and digital wallet service by Apple Inc that allows uses to
make payments using the iPhone 6, 6Plus and later.
unit trusts and the Unit Trusts
Australian Securities - Form collective investment in which a large number of investors contribute funds
Exchange - Funds are pooled together and invested into financial assets by the trustee
Australian Securities Exchange (ASX)
- Primary stock exchange group in Australia (biggest stocks – BHP Billiton, CBA,
Telstra, RioTinto and NAB)
- ASX acts as a primary market – enable company to raise new capital through issue
of shares and through the receipt of proceeds from the sale of securities
Secondary market – pre-owned or second-hand securities such as shares are traded
between investors who may be individuals, businesses, governments or financial
institutions
influence of government Australian Securities and Investments Commission (ASIC)
Australian Securities and - Independent statutory commission – enforces and administers the Corporations Act
Investment Commission, and protects consumers (in investments, life and general insurance, superannuation
company taxation and banking)
- Aim: reducing fraud and unfair practices in financial markets and financial products
Influence of Government: - Ensures that companies adhere to the law, collects information about companies
economic policies – and makes it available to the public – includes financial information companies
monetary and fiscal disclose in their annual reports
policy, legislation and the - If business breaches the law, ASIC investigates the matter and determine an
various roles of appropriate remedy (imprisonment and monetary penalties) – Failure to comply with
government responsible Corporations Act is generates negative publicity
for monitoring and Company Taxation
administration - Corporations pay a flat rate of tax on profits (30%/ 27.5% for businesses earning
less than $10 million)
- Reform of federal tax system that will improve Australia’s international
competitiveness and make Australia an even more attractive place to invest, thereby
driving long-term economic growth → more jobs and higher wages
Corporations Act 2001 (Cwlth)- businesses must disclose financial information
McDonald’s pays an effective rate of 24.2% tax (globally) – this is reduced from
previous years due to declining tax rates in the US
McDonald’s paid $137 million in tax in Australia in 2017
global market influences Global Economic Outlook
– economic outlook, - Refers to the projected changes to the level of economic growth throughout the
availability of funds, world
interest rates - Outlook is positive (world economic growth is to increase):
Global Market Influences: - Increasing demand for products and services – businesses increase production to
greater risk than meet demand and require funds to purchase equipment, employ or train staff or
domestic ones – expand the size of the business
uncontrollable and the - Decrease interest rates on funds borrowed internationally from the financial money
business as to use market – results from a decrease in the level risk associated with repayments
appropriate financial - However, a poor economic outlook will impact on financial decisions in that opposite
management strategies way to those mentioned previously
to minimise the negative Availability Funds
effects - Ease with which a business can access funds (for borrowing) on the international
financial markets
Globalisation – led to the - Internationals financial market is made up of institutions, companies and
interdependence governments that are prepared to lend money to similar bodies who may need to
between economies and raise capital
their business – relies on - There are various conditions and rates that apply that are based on: risk, demand

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trade for expansion and and supply and domestic economic conditions
increased profits - Global Financial Crisis (08-09) had a major impact availability of funds for all
companies and institutions – caused a sharp increase in interest rates (reflection of
the high level of risk in lending
Interest Rates
- Cost of borrowing money – higher the level of risk, the higher the interest rates
- A business that plans to either relocate offshore or expand domestic production
facilities to increase exporting - finance needs to be raised
- Australian interest rates are usually higher than other countries – US and Japan →
tempted to borrow necessary finance from an overseas source to gain the advantage
of lower interest rates
- Risk of exchange rate movements → adverse currency fluctuations could scare a
business off overseas interest rates (‘cheap interests’ may end up costing more)
McDonald’s is somewhat “recession-proof,” and often suffers when individuals have
more disposable income as they spend it elsewhere. Relatively easy access to funds
due to low interest rates globally so they are buying back equity
planning and - Begins with long term (strategic) plans:
implementing – - Includes: planned capital expenditure (what is spent on a business’s non-current or
financial needs, fixed assets) – generates revenue, planned investments, planned sources of finance,
budgets, record R&D, marketing and product development activities
systems, - Setting the goals and objectives, determining strategies to achieve goals and
financial risks identifying and evaluating alternative courses of action and choosing best option for
the biz
Planning and Steps in Planning
Implementing: financial - Determining Financial Needs: financial information collected before future plans e.g.
planning determines how balance sheets, revenue statements and cash flow statements
a business’s goals will be - Developing budgets: provide information in quantitative terms about requirements to
achieved achieve particular purpose – financial information for specific goals of a business –
enable constant monitoring of objectives and if they are being achieved (Types:
operating, project and financial)
Long-Term Plans: 2-10 - Monitoring Record Systems: mechanisms employed by an organisation to ensure
years – guide the that date are recorded – information accurate, reliable, efficient and accessible,
development of short- decisions are based on this information (minimising errors in the recording process –
term tactical and record all items twice)
operating plans - Identifying Financial Risks: risk of firm being unable to cover its financial obligations
such as debt – a business needs to meet its financial obligations (short and long
Short-Term Plans: more term), businesses need to minimise must consider the amount of profit that will be
specific, covers plans and generated (most common problems: theft, fraud, damage/loss of assets, errors in
budgets for periods of 2 record systems)
or less years Establishing Financial Controls: policies and procedures – ensure that the plans of an
organisation will be achieved in the most efficient way, common financial controls –
budgets (assist in estimating resource requirements) and variance reporting (difference
between budgeted and actual performance)
What statements do business such as Apple and McDonald’s have to publish annually
and why?
● Balance Sheet
● Revenue Statement
● Cash Flow Statement

To inform stakeholders
To assess financial performance – actual v target
To Satisfy legal requirements of ASIC and ASX

McDonalds:
“Need to reimage some existing restaurants” → budgeted for this in 2019 ($1 billion
updating 2000 stores in the United States)
Monitoring record systems – uses the NP6 POS system + usual book-keeping and
records
Future contracts to manage interest rates + forward/options contracts for other
currencies
External auditor of Ernst and Young

McDonalds Manages financial risk through using financial instruments:

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 7

• Interest rate swaps

• Foreign currency forwards and options
• Currency swaps
financial controls Debt Finance
debt and equity financing - Funds are readily available and interest payments are tax deductible – reducing the
– advantages and cost of financing
disadvantages of Advantages: Funds – readily available, Increased funds should lead to increased
each earnings and profits, tax deduction for interest payments
Disadvantages: Increased risk if debt comes from financial institutions (interest, bank
matching the terms and charges, principal repaid), Security is required by the business, regular repayments have
source of finance to to be made and lenders have first claim on business assets
business purpose Equity Finance
monitoring and controlling - Shareholders’ funds – remains in the business for an indefinite time
– cash flow Advantages: no repayments (unless owners leave), cheaper than debt finance (no
statement, income interest), owners have control over their own equity, low gearing
statement, balance Disadvantages: lower profits and lower returns owner, expectation of return on
sheet investments, ownership is diluted

Matching the Terms and Sources of Finance to Business Purpose

Decisions is influenced by:
- Terms of Finance – suitable for the structure of business and purpose funds are
required (short term finance for short term purposes – temporary cash shortfall)
- Cost of Each of Funding – required rate of return considered and balanced against
costs of source
- Structure of Business – small businesses have fewer opportunities for equity capital
– raised from private sources while corporate biz issue shares to the public
- Costs – set-up costs and interest rates – costs fluctuate depending on market and
economic conditions
- Flexibility of the Source of Funding – variable as if firms have excess funds,
borrowings can be paid off faster (bank overdrafts provide greater flexibility than
debentures and factoring)
- Availability of Finance – heavy dependence on few investors can increase risk if
investors pull out or commitments cannot be met (low credit rating – alternative
source of funding)
- Level of Control – lender requires security over an asset – business’ ability to
consider future financing possibilities is reduced
McDonald’s:
Has increased its debt over recent years:

Positives of debt finance

(+) Australia has historically low interest rates – cheap finance
(+) tax deductible
(+) flexible

Negatives of debt finance

(-) raising of equity
(-) set nature of amount and time frame of repayments
(-) expectation for large dividends
(-) expense of interest

Positives of Equity Finance

(+) can choose to not pay dividends and retain cash for expansion

Negatives of Equity Finance

(-) dilutes ownership
(-) reduces ability to provide returns/profits (less funds)

McDonald’s leases property for 20 years and the franchisee leases this off McDonald’s
for 20 years
Monitoring and Cash Flow Statements
Controlling: inconsistent - Indicates the movement of cash receipts and cash payments resulting from
methods and review transactions
systems of control have - Identify trends – useful predictor of change

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direct impact viability of - Shows whether a firm can: generate a favourable cash flow (inflows exceeds
the business – outflows), meet financial commitments (repay borrowings), sufficient funds for future
management monitors expansion or change, obtain finance from external sources when needed, pays
ext. and int. impact drawings to owners
financially on biz Operating Activities: cash inflows and outflows – provision of goods and services
operations Inflow examples: income from sales (cash) and dividends and interest rec.
- Changes to the Outflow examples: suppliers, employees, other expenses (rent, insurance)
economic outlook Investing Activities: purchase and sale of non-current assets and investments
- Internal production Examples: selling of old car, purchasing new plant & equipment
methods Financing Activities: borrowing activities of a business
- Changes in work Borrowing Inflows: equity (shares on capital contribution from owner), debt (loans from
place laws financial institutions)
Cash Outflows: repayments of debt and cash drawings of owner and payments of
dividends
Revenue Statements
- Summary of income earned and the expenses incurred over a period of trading
- Operating income earned from the main function of the business (sales, interest,
rent)
- Operating expenses: purchase of inventories, payment for services and other
incurred in the main operations
- Income is profit while expenses are losses
- Comparison of revenue statements allows managers to analyse trends before
making significant change (are expenses increasing? Profits? Significant changes?)
Key Elements
- Dates of stock – two dates, one for the beginning of the time period (opening stock
earlier date) and one for the end (closing stock)
- Costs of Goods Sold: COGS= Opening Stock + Purchases (+ other COGS expenses) –
Closing Stock
- Calculating Gross Profit/Loss: Gross Profit = Sales –COGS
- Calculating Net Profit/Loss: Net Profit = Gross Profit – Operating Expenses (+ any
other income and – any other expenses)
Balance Sheets
- Represents a business’s assets and liabilities at a particular point in time, expressed
in monetary terms, and represents the net worth of the business
- Assets: items of value owned by the business – Current (cash within 12 months –
short term) and Non-current (not expected to be turned into cash within 12 months
(long term)
- Liabilities: what the business owes
- Owner’s Equity: funds contributed by the owner/s
- Does it have enough assets to cover debts? Interest and money borrowed is able to
be paid back? Return on investment?
ACCOUNTING EQUATION
Assets = Liabilities + Owner’s Equity

Key Elements
- All assets and liabilities of biz
- Liquidity – compare current assets to current liabilities (short term debts?)
- Solvency – debt compared with assets (too much debt?)
- Profitability – net profit (compared with owners’ equity)
- Are stocks levels appropriate?, Are accounts receivable being collected?, Is the value
of goodwill appropriate?, How much debt and thus interest payments are require

profitability – gross profit Liquidity (Current Ratio)

ratio (gross profit ÷ - Current assets
sales); net profit ratio Current liabilities
(net profit ÷ sales); - Gives an indication of how well a business can meet its current liabilities
return on equity ratio - Ideal ratio is 2:1
(net profit ÷ total Gearing or Solvency (Debt to Equity Ratio)
equity) - Total liabilities x 100
efficiency – expense Total equity
ratio (total expenses - Gearing is the relationship between the level of debt and equity of the business –
÷ sales), accounts being highly geared (higher percentage), can cause solvency issues
receivable turnover - For small businesses 60% is appropriate, but for larger businesses 100% and over is

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 9

ratio (sales ÷ appropriate

accounts receivable) Profitability
Gross Profit Ratio
- Gross Profit x 100
comparative ratio Sales
analysis – over - Measures percentage of sales that is gross profit
different time - A higher percentage is preferred, but the ideal percentage is often measured by
periods, against comparisons
standards, with Net Profit Ratio
similar businesses - Net Profit x 100
Sales
- Measures what percentage of sales is net profit
- Higher percentage is preferred, but the ideal percentage is often measured by
comparisons
Return on Equity
- Net Profit _ x 100
Total Equity
- Shows how much is being returned on the owner’s investment and the risk of
investing in the business
- Higher return is better and the ideal amount is 20%
Efficiency
Expense Ratio
- Expenses x 100
Sales
- Shows the relationship between sales and expenses
- Ideal amount depends on business objectives and circumstances
Accounts Receivable Turnover Ratio
- Credit sales (use result for second step)
Accounts receivable

- 365
- Result from above

Shows how long it takes for the business to receive cash for credit sales
Ideal time 14-30 days
Comparative Ratio Analysis
- Comparing ratios through comparisons and benchmarks
- Over Different Time Periods: identify trends in profit, costs and financial stability –
determine if the business is reaching its financial goals of increasing profitability,
growth, efficiency, liquidity and solvency
- Against Standards: compare results to what is considered to be the best, a
benchmark to aim its objectives towards (may be global standard and how Australian
business compares to best in world)
- With Similar Businesses: compare the results to businesses in the same industry, is
the business performance above average? (allows the manager to review and
develop new strategies) – more common to use global standards
Case study Liquidity
McDonald’s Yum Brands Inc
2018 2019 2020 2018 2019 2020
1.36:1 0.98:1 1.01:1 0.93.1 0.99:1 1.00:1
McDonald’s has a current ratio of 1.01:1. It indicates that the company may have
difficulty meeting its current obligations. Low values, however, do not indicate a critical
problem. If McDonald’s has good long-term prospects, it may be able to borrow against
those prospects to meet current obligations.

The current ratio can give a sense of the efficiency of a company's operating cycle or
its ability to turn its product into cash. Companies that have trouble getting paid on
their receivables or have long inventory turnover can run into liquidity problems
because they are unable to alleviate their obligations. Because business operations
differ in each industry, it is always more useful to compare companies within the
same industry.
Acceptable current ratios vary from industry to industry and are generally between 1
and 3 for healthy businesses.
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The higher the current ratio, the more capable the company is of paying its
obligations. A ratio under 1 (2019 figure) suggests that the company would be
unable to pay off its obligations if they came due at that point. While a lower figure
shows the company is not in ideal financial health, it does not necessarily mean that
it will go bankrupt - as there are many ways to access financing - but it is definitely
not a good sign.
If all other things were equal, a creditor, who is expecting to be paid in the next 12
months, would consider a high current ratio to be better than a low current ratio,
because a high current ratio means that the company is more likely to meet its
liabilities which fall due in the next 12 months.

Gross Profit
McDonald’s Yum Brands Inc
2018 2019 2020 2018 2019 2020
68% 68% 69% 70% 69% 68%
A positive Gross Profit is only the first step for a company to make a net profit. The gross
profit is measured by taking the cost of the food and packaging (COGS and subtracting
this figure from the sales. The gross profit needs to be big enough to also cover related
labor, equipment, rental, marketing/advertising, research and development and a lot of
other costs in selling the products.

Net Profit (store level)

McDonald’s Yum Brands Inc
2018 2019 2020 2018 2019 2020
17% 18% 14% 18% 20% 17%

Although Net Income and Earnings-per-Share (EPS) are the most widely used parameter
in measuring a company's profitability and valuation, it is the least reliable. The reason is
that reported earnings can be manipulated easily by adjusting any numbers such as
depreciation, depletion and amotorization and non-recurring items.
But the long term trend of the net margin is a good indicator of the competitiveness and
health of the business.
During COVID-19 (2020) the net profit was reduced due to many stores either being
closed or open with limited trade.
Debt to Equity Gearing or Solvency
McDonald’s Yum Brands Inc Industry Average
(eating and drinking
places)
2021 2021 2021
(negative equity) (negative equity) (negative equity)

As a rule of thumb, a debt-ratio more than 1 indicates that a considerable portion of debt
is funded by assets. A higher debt-ratio can also imply that the company might be putting
itself at risk for default, if interest rates were to increase. However, debt-ratios vary widely
across different industries. A debt ratio of 35% might be higher for one industry, whereas
average for another. A high debt to equity ratio generally means that a company has
been aggressive in financing its growth with debt. This can result in volatile earnings as a
result of the additional interest expense. Both McDonald’s and Yum Brands have
employed a strategy of buying back stock from shareholders – resulting in negative
equity (more debt than equity) and meaning that they are very highly geared, however –
most of the debt is long term (some not repayable until 2056).

Return on Equity
McDonald’s Yum Brands Inc Industry Average
(eating and drinking
places)
2021 2021 2021
(negative equity) (negative equity) (negative equity)

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ROE % measures the rate of return on the ownership interest (shareholder's equity) of
the common stock owners. It measures a firm's efficiency at generating profits from
every unit of shareholders' equity (also known as net assets or assets minus
liabilities). ROE % shows how well a company uses investment funds to generate
earnings growth. ROE %s between 15% and 20% are considered desirable. Both
McDonald’s and Yum Brands had negative equity at the end of the 2020 financial
year. As equity has been purchased back by both companies, both firms have
negative equity.

McDonald’s isn’t only a burger-flipping restaurant chain. Well, it is, but not purely. Peel
back the layers and you’ll find that the corporate entity is actually one very successful
real estate company. Former McDonald’s CFO, Harry J. Sonneborn, is even quoted as
saying, “we are not technically in the food business. We are in the real estate business.
The only reason we sell fifteen-cent hamburgers is because they are the greatest
producer of revenue, from which our tenants can pay us our rent.”

Accounts Receivable
Days sales outstanding measures of the average number of days that a company takes
to collect revenue after a sale has been made. It is a financial ratio that illustrates how
well a company's Accounts Receivable are being managed. Accounts Receivable can be
measured by Days Sales Outstanding.

Expense Ratio (store level)

McDonald’s Yum Brands Inc
2018 2019 2020 2018 2019 2020
83% 82% 86% 82% 80% 83%

Comparative Ratio Analysis

Compares mainly to Yum! Brands Inc as this is their largest competitor (43,000 stores)

Accounts receivable turnover - Very high efficiency – cash customers for McDonald’s
Woolworths and Apple. These reflect strong businesses.

limitations of financial Limitations include:

reports – normalised - Normalised Earnings: earnings adjusted to remove unusual or one-time influences,
earnings, capitalising large one-time gain or loss would dramatically affect a business’s profit or loss (this
expenses, valuing assets, is done to give a more accurate depiction of true earnings of a company)
timing issues, debt - Capitalising Expenses: recording an expense as an asset on balance sheet rather
repayments, notes to the than expense on income statement – understates expense, overstates profits (e.g.
financial statements R&D)
- Valuing Assets: estimating value of assets, value changes over time (appreciation –
Limitation of Financial real estate, depreciation – vehicles) – leads to a limitation because value is
Reports: financial reports estimated and can give false impression of business (e.g. goodwill and patents)
do not always give a - Timing Issues: financial reporting is done in period – possible to distort current
completely accurate financial position of business, a business can hold off large expense or revenue =
representation of the meaning current financial statements are not a true representation of business’s
business’ financial financial position
position - Debt Payments: don’t disclose all information about debt payments – how long
business has had debt, capacity of business to pay debt, when debts are due
- Notes to the Financial Statement: additional notes added at the end of financial
statements – display important information about accounting techniques, limitation
as they are long and filled with technical jargon (hard to understand)
McDonald’s - Capitalises “development costs” for property such as rates, taxes and legal
fees are capitalised. This means that expenses for a new restaurant site are recorded as
assets (eg as if they were a building) and depreciated over the life of that asset, which
could be up to 40 years. This serves the purpose of spreading the expenses over time (in
line with standard accounting practices) but can have the effect of overstating profit.
ethical issues related to - Decisions must reflect the objectives of a business and the interests of owners and
financial reports shareholders
Ethical Issues Related to - Area of Ethical Consideration: valuing assets (inventories and accounts receivable) –
Financial Reports: influences the level of working capital and short-term financial stability of a business
ethical and legal (assets are overvalued working capital will be high and indicate an untrue working
obligation to ensure capital figure)
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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 12

financial records are - Preparing budgets, expenditures and revenues are estimated – common practice to
accurate overestimate expenses and understate revenues to allow for unexpected and
uncertain events
- Ethics are closely to legal aspects of financial management – legislation is put in
place to guard against unethical behaviour but there is a time lag between
recognition and implementation
- Laws relating to corporations – directors have a duty to: act in good faith, exercise
power for proper purpose in name of corporation, exercise discretion reasonably and
properly and avoids conflicts of interest
- ASX (Aus. Securities Exchange) governance council officiates requirements of
corporations listed on ASX and responsibilities with compliance with law, disclosure
and transparency of company details to public
Examine Ethical Financial Report Practices
Audited Accounts
- Independent check of the accuracy of financial records and accounting
- Potential users of information (owners, shareholders etc.) rely on audit before
making decisions
- Important part of the control function
- Types of Audits:
Internal Audits: conducted internally by employees to check accounting procedures and
accuracy of financial records
Management Audits: review of firm’s strategic plan – determine changes to be made
External Audits: requirement of Corporations Act 2001 (Cwlth) – investigated by
independent and specialised audit accountants (guarantee their authenticity), auditor
issues a statement stating accuracy of firms records – true and fair view of the state of
affairs and comply with Australian auditing standards

- Int. and Ext. Audits guard against unnecessary waste, inefficient use of resources,
misuse of funds, fraud and theft
- Check the control procedures of a business by physically checking assets (e.g. cash
is counted, condition and amount of inventory is checked etc.)
Record Keeping
- Sources documents are need for every transaction
- Temptation to receive payment in the form of notes and not record transaction
- If this is not recorded it does not show up as business revenue and will reduce
business’s profit, reducing tax burden
- Australian Taxation Office (ATO) monitors business operation – evaders of tax receive
fines in excess of amount saved in tax
- Harm the reputation of business, alienate customers
Goods and Services Tax (GST) Obligations
- Purpose: more difficult for businesses and individuals operating in the cash economy
to avoid tax
- Tax is collected at every stage in the production of goods and services sold to the
public
- Ethical and legal obligation to comply with GST
Reporting Practices
- Stakeholders are entitled to business financial information (receive reports annually
- Pretend profit is lower than it should be – attempt in defrauding the ATO
- If a business wants to raise additional capital from existing shareholders/bank,
understating profit may make it more difficult to persuade these sources of finance
to lend to the business – understating profit or overstating the value of assets may
prove counter-productive when a potential buyer subjects the reports to close
scrutiny

Ethical issues
McDonald’s - Buying back shares decreases the number of shares held by the public; this
increasing the ownership stake of each share; this keeps the share price high and
increases the pay of senior executives

Apple paid little tax in Australia compared to its global situation. The Australian Federal
Government has announced measures to tackle the issue of Australian subsidiaries such
as Apple from using tax minimisation strategies, such as reporting a higher cost of goods
sold when goods are imported by the local subsidiary but manufactured overseas from its

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 13

global parent.
financial management - If more money goes out than comes in or if money must be paid out before cash
strategies payments have been received, there is a cash flow problem
cash flow management - Cash flow does not tell you what debts are owed and what is owed to you – budgets
cash flow statements are important tools
distribution of payments, Examples
discounts for early Inflows Outflows
payment, factoring Sales, cash payments for accounts Payments for supplies – raw materials,
receivable, commissions received, interest on loans, operating expenses,
Cash Flow Management: sales of assets, proceeds from drawings, purchase of assets
movement of cash in and issues of shares
out of a business over
period of time Cash Flow Statements
- First aspect of financial planning is constructing a cash flow statement – predicts
monthly inflows and outflows of cash – identify trends (useful predictor of change)
Management Strategies
- Shortfalls of cash over long periods are of great concern to the business as
insolvency or bankruptcy could result
- Business must ensure cash is available to make payments when they are due to:
Aus. Tax Office, suppliers for account payable, employees for wages
Distribution of Payments
- Distributing payments throughout the month, year or other period so that cash
shortfalls do not occur
- Cash flow projection – assets in identifying periods of potential shortfalls/surpluses
Discounts for Early Payment
- Offering debtors a discount for early payments
- Most effective when targeted at debtors that owe the largest amounts
- Beneficial to both debtors who save money and therefore improve their cash flow but
also positively affects business cash flow status
Factoring
- Selling of accounts receivable for a discounted price to a finance or a specialist
factoring company
- Saves on costs involved with following up on unpaid accounts and debt collection
and improves working capital

Cash flow management

McDonald’s increases cash by increasing non-current liabilities and decreasing
infrastructure spending. McDonald’s decreases the number of company stores and
increases the number of franchised stores, thus generating cash from the initial sale and
more stable income streams from rent and royalties. Hence, real estate is a significant
contributor to McDonald’s income.

Due to the large volumes that Apple produces, suppliers provide discounts to the
production of their products. Apple focuses on carefully distributing payments throughout
each quarter. Apple sets prices with suppliers which allows them to forecast payments
over the fiscal year.

Distribution of payments > Companies can spread out the cost of bills or debt over a few
months. For example, NRMA allows customers to pay monthly or choose the entire bill.

Small to medium businesses use factoring to manage their cash flow because frequently
their customers have 30 days terms to pay.

Flowsell is an Australian company which supplies shelving and merchandising solutions

for Australian retail stores, including Woolworths. Flowsell must pay their supplier within
30 days and invoices these accounts to their customers immediately. Flowsell uses Bibby
Financial Services (Factoring Company), so that it can access the funds straight away to
ensure their supplier is paid on time
Working Capital - Effective working capital will mean currents assets will be greater than its current
Management (liquidity): liabilities
working capital is the - Working capital ratio (current ratio)
current assets used in - Management strategies – increasing the value of current assets and decreasing the
the day-to-day running of value of current liabilities

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 14

a business; current Control of Current Assets

assets must be well - Increase the amount of cash in the business’s bank account or increase the
managed so the business reliability and frequently of cash inflow
has enough cash to pay Cash
expenses and bills when - Most liquid current assets and ensures that a business can pay its debts, repay
they are due; inventory loans and pay accounts
also needs to be - Supplies of cash allow management to take advantage of investment opportunities
available to sell - Planning for the timing of cash receipts, cash payments and asset purchases –avoid
cash shortages or excess cash
- Cash shortages may occur due to unforeseen expenses are a cost to the business →
Working Capital Formula money may need to be borrowed, incurring interest and possibly set-up costs
= current assets – Accounts Receivable (debtors)
current liabilities - money still owed by customers for sales made on credit – main problem for
businesses is that receivables aren’t turned into cash quickly enough (customers
working capital aren’t paying their debt on time)
management - Ensure receivables are turned into cash upon falling due: reminding customers as
control of current date approaches, no future credit for late payments, incentives for early payments,
assets – cash, assess customers credit history before giving credit
receivables, Inventory
inventories - Too much cash invested in raw materials, work-in-progress and finished goods
control of current - Cash has been absorbed by inventory (not enough for short-term debts)
liabilities – - Inventory takes a long time to sell to convert back into cash – business can have
payables, loans, high inventory levels (storage costs as well)
overdrafts - Lost stock through poor security, monitoring, administration errors
- Internal control over inventory: physical inspections & counts, cameras (prevent
theft), suitable transportation and storage to prevent damage, limiting staff access
- Just in Time (JIT) – reduce costs of storing stock, smaller amount of storage →
reduce expenses, frees up cash to pay liabilities
- Computerised inventory management – reduce stock loss, auto email suppliers for
more stock to limit shortages, identify stock not selling well – eliminate item from
product mix
Control of Current Liabilities
Payables
- Ensure payables timing maintains adequate cash resources
- Holding back of accounts payable until their final due date (stretching) – cheap way
to improve liquidity
- Possible discounts by some creditors – reduce costs and assists cash flow
- Pay by due date to avoid extra charges – trade credit will be extended to the
business in the future
Loans
- Cover property payments, unforeseen situations, import export commitments
- Costs for establishments, interest rates and ongoing changes must be investigated
and monitored to minimise costs
- Loans are expensive – costs should be minimised
- Control → investigating alternative sources of funds from different banks and
financial institutions
Overdrafts
- Control overdraft – all cash is received is promptly deposited in business’s overdraft
account to reduce amount owing

Working capital management

McDonald’s:
Accounts Receivables – McDonald’s has strict contractual control about the terms of
payment from its franchishees → McDonalds applies fees for late payments. During
COVID 19 McDonald’s delayed collection of $1billion from its franchisees – whilst this
maintained liquidity in the franchise system it placed extra pressure on the liquidity of the
company.
Inventory: - Relies 100% on external suppliers for inventory and uses the system
“Manugistics” to monitor stock
Control of current liabilities: - Average of 32 days to pay payables (up from 17.4 days in
recent years)
Overdrafts - Pays 0.08% fee per annum to keep available US$3.5 billion line of credit

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 15

Apple sells mostly to a consumer market, meaning that Apple’s accounts receivables are
next to nil as most purchases are cash on demand transactions. Inventories are
controlled by Just in Time production method (online sales). Supplies have a two week
turnaround on production to meet demand. Warehousing is kept to a minimum. When
selecting suppliers, Apple negotiates a credit policy with the supplier. Due to large
volumes being produced, Apple negotiates favourable terms.

Woolworths uses a Just in Time Inventory management strategy due to changes in

logistics technology.

Receivables means that the service is provided, but money is owed! Electricity, gas and
phone companies sometime provide a discount for early payments! AGL: 28% off
electricity usage charges when you pay on time
strategies – leasing, sale Strategies for Managing Working Capital
and lease back Leasing
- Hire equipment without purchasing
- Preserve working capital: initial cash deposit is lower, tax deductible (reduce overall
tax), maintenance costs are paid by the lessor (under operating lease), easier to
budget lease payments (conversely loan payments fluctuate)
Sales and Leaseback
- Business sells assets (eg equipment/motor vehicle) to buyer that leases it back to
them
Boosts working capital – payment they receive from the sale is then used to increase net
working capital
Leasing, sale and lease back
Woolworths’ leasing costs include leases for the Norwest office and distribution centres
Leasing
McDonald’s makes extensive use of leasing (mostly its properties). TESLA leases out
their vehicles to businesses. They pay for the running of it. Many car dealerships lease
out cars to people for money.

Profitability Management - Revenue controls

When Apple asks for a price quote for parts such as touch screens, it demands a detailed
account of how the manufacturer arrived at the quote, including its estimates for
material and labour costs and its own projected profit. This allows Apple to set marketing
and sales objectives by calculating break even analysis and monitoring the sales mix
strategies.
profitability management Cost Controls
cost controls – fixed and - Influences both profitability & competitiveness
variable, cost centres, - If there is limited opportunities to grow – cost controls improve profits
expense minimisation Fixed and Variable Costs
revenue controls – - Fixed: do not change when a business produces more goods or if it sells more (eg
marketing objectives salaries, rent, lease payments, interest on loans)
- Variable: increase with output (eg labour, electricity, raw materials)
Profitability Management: - Focus on variable costs – more flexibility
profits maximised by - Reduction in variable costs – increase profits, reduce prices → competitiveness is
controlling costs – lower improved (eg cheaper supplier)
cost structure Cost Centres
- Work unit in a business with a lot of v. costs – cost centres effective way to control
costs
- Cost Centres: part of the business that is separate from the rest of the business in
terms of its costs –incurs significant costs (associated with raw materials, storing
inventory, overtime payments) – costs are carefully controlled
- Effective Method: establish cost centre, responsible for costs – person has skills to
record, measure and monitor cost usage effectively→ wastage is immediately picked
up
Expense Minimisation
- Reducing expenses (wages, rent and leasing payments to a min.)
Revenue Controls – Marketing Strategies
- Maximum amount of revenue is generated
- Can use marketing strategies for Q’s
Sales Objectives
- Continuously improve the processes that result in sales

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 16

- Meet customer’s need more effectively than its competitors, increase sales
- Methods: better quality, improved product, better design, faster or more reliable
delivery
Sales Mix
- Breakdown of sales revenue by products (eg Woolworths Sales Mix: fruit & veg, dairy,
canned goods etc.)
Pricing Mix
- Breakdown of products on the basis of their contribution to profitability
- Improve pricing mix to maximise profits (customers want ‘value-for-money’)
Pricing Policy
- Overall business pricing strategy
- Factors: demand and supply for product, competitors
- Manufacturing businesses: costs of productions, design features and success of the
brand
McDonalds:
Fixed and variable costs - Utilise contracts to set royalties and rental fees, strict rostering
requirements limit fluctuant wage expenses
Has a new inventory system that responds to customer orders and lowers food wastage –
lowering variable costs
Franchises are responsible for their costs, they are converting more stores to franchises
to lower costs (predicted to save US$500 mill per year)
Increasing franchises should provide steadier revenue, as revenue is largely from renting
fees
global financial Exchange Rate/ Currency Fluctuations
management - In all global transactions it is necessary to convert one currency to another → foreign
exchange rates exchange market (determines price of one currency relative to another)
interest rates - Foreign exchange rate is the ratio of one currency to another
Global Financial - Currency Appreciation: raises the value of Aus $ compared to other currencies –
Management: financial each unit of foreign currency buys fewer Aus $’s and one Aus $ buys more foreign
risks associated with currency
global expansion are - makes exports more expensive, imports will decrease → reduce the international
greater than those competence of Aus exporting business
encountered domestically - Currency Depreciation: opposite impact – lowers price of Aus dollars in terms of
– ‘uncontrollable’ foreign currencies, one foreign unit buys more Aus $, exports become cheaper,
(external business imports expensive, improve competitiveness of Australian exporting business
environment) financial Currency Fluctuations impact revenue, profitability and production costs.
influences: currency Interest Rates
fluctuations, interest - Business that plans to locate offshore or expand domestic production facilities need
rates and overseas to raise finance
borrowing - Australia interest tend to be higher than other countries, US and Jap→ tempted to
borrow from overseas for lower interest rates
- Risk: exchange rate movements – adverse change rate movements means
advantages of lower interest rates is eliminated (cheap interest could cost more)

McDonald’s
Derives most debt in local situations in order to limit fluctuations from other countries
They also use forward and option contracts to limit risk
Average interest rate of 3.2% on all debt and 91% of debt is fixed to prevent interest

Apple - Interest rates

In 2018 Apple continued to capitalise on low interest rates by selling billions of Bonds.
Borrowing money when interest rates (cost of borrowing) are low allows Apple to invest in
new and innovative assets at a low cost.

Woolworths is exposed to financial risks in its international operations such as foreign

exchange rates.
Woolworths is financially exposed because purchases of inventory from overseas are
predominantly denominated in foreign currency (primarily US dollars and New Zealand
dollars).

BMW lost 2.4 BN in profits due to exchange rates changing. BMW did not want to pass
on its exchange rate costs to consumers through price increases.

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 17

Exchange rates hit Toyota’s profit and it dropped by 23% in 2017.

methods of international Methods of international payment (in order of level risk for exporter)
payment – payment Payment in Advance
in advance, letter of - Money is transferred to the exporter’s bank before the goods are shipped
credit, clean Letter of Credit
payment, bill of - Better to deal with the risk for both exporter and importer but is more expensive
exchange - Importer’s bank guarantees agreed amounts as soon as goods arrive in importer’s
warehouse
- Exporter: no risk of non-payment
- Importer: no risk of goods not arriving
Bills of Exchange
- Document instructs the buyer to pay for the goods on a specified date (usually when
goods are delivered)
- Reduces risk for exporter, allows exporter to keep control of the goods until payment
is made
- Exporter gives ‘bill of lading’ to bank – agreement between exporter and the
transporting business – sets out where goods are sent + legal ownership of goods
- Goods are only transferred once importer has been paid – exporter keeps legal
ownership until payment is made
Clean Payment
- Most risk: trust the buyer and run an open account or clean payment – goods are
shipped

With payments for stock from suppliers, Apple can employ a range of payment methods.
Apple negotiates methods of payments and bills of exchange as part of supplier
contracts. Apple has the advantage due to the large numbers they require

Clean Payment
Allows Woolworths to access to the goods with a promise to repay at a later date.
Possible because Woolworths is a large reputable public company with a high credit
rating. Effective method as it allows Woolworths to generate revenue from the goods
prior to payment – positive cash flow.
Little risk to Woolworths (or to suppliers due to size and financial stability of Woolworths)
Letter of credit - $18 million in available letter of credit capacity. Vistra still has 18 million
dollars in funds that they can draw from, if they need extra capital.
Hedging, derivatives A practice protecting a business from losses (RISK) resulting from financial transaction
such as converting from one currency to another
Hedging
- Two parties agree exchange and finalise a deal immediately – “spot exchange”
- Spot exchange rate – value of one currency to another currency on a particular day
(it may not be the most favourable rate)
- Minimise the risk of currency fluctuations – hedging
- Reduce the level of uncertainty involved with financial interactions
Natural Hedging
- Eliminate or minimise risk foreign exchange exposure: establishing offshore
subsidiaries, arranging import and export receipts dominate in same foreign currency
– losses from a movement are offset by gains from another, marketing strategies –
reduce price sensitivity of exported products and insisting on both import and export
contracts in Aus $ (transfer risk to the buyer – importer)
Financial Instrument Hedging
- Derivatives – minimise or spread the risk of currency fluctuations
Derivatives
- Minimise the financial risks with exporting – financial institutions developing
products called derivatives
- Simple financial instruments – lessen the exporting risks associated with currency
fluctuations
- Can be as dangerous as the risk they protect if used unwisely
Forward Exchange Contract
- Exchange one currency for another currency at an agreed exchange rate on future
date
- Banks guarantees exporter - fixed rate of exchange for money generated from the
sale of exported goods
Options Contract

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 18

- Buyer the right, no obligation, to buy/sell foreign currency at some time in the future
- Protected from unfavourable exchange rate fluctuations – maintain opportunity for
gain should exchange rate movements be favourable
- More expensive than forward exchange contract
Swap Contract
- Agreement to exchange currency in the spot market – guarantee to reverse
transaction in the future
- Spot sale of one currency together with a forward repurchase of the currency at a
specified date (eg swapping $50 mil Aus $ for US $ now + agreement to reverse
swap within three months)
- Used to raise finance in a country in which the business is not well known – forced to
pay higher interest rate than a better-known borrower local business
Main Advantage: alter its exposure to exchange fluctuations without discarding the
original transaction
Important strategy to hedge for currency rate fluctuations for two reasons (Woolworths):
Imports $millions of goods each year – cost of inputs and goods sold increase with
unfavourable movements - impact on margins and expenses and therefore profitability
Repatriates profits from NZ and India – fluctuations can lead to lower profitability/
dividends from their overseas operations. Therefore it is exposed to financial risks from
foreign exchange dealings

Hedging - By making transactions in local currencies McDonald’s takes advantage of a

natural hedge to minimise risk (relationship between revenue and expenses in that
country)
Hedging is used by Qantas to minimise the risk of financial transactions. Qantas has a
very successful hedging program particularly with its fuel and uses a mix of swaps,
forward cover and options. Hedging has enabled Qantas to improve its financial
performance by ensuring certainty and reducing costs therefore increasing profitability.

Derivatives - Apple reduces exporting risks by engaging in forward exchange contracts

(exchange currency at a particular rate at a particular time), options contracts (right to
sell/buy currency in the future) or swap contracts (spot sale of one currency with
agreement to repurchase the currency at a future date) depending on the suppliers and
the volumes that Apple produces.

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 19

OPERATIONS
Operations in its core is about:
- What Services or products are we producing?
- What affects our production?
- How do we turn things or inputs into outputs

Role of Operations Management

Strategic role of It focuses on decisions and plans for achieving long-term goals. It is done through:
operations management- Cost Leadership: attempting to make a product at the cheapest production cost while not
cost leadership, sacrificing quality.
good/service - Lower quality and using low-cost packaging
differentiation - Cheapest production and distribution, raw materials
- Economies of scale
- Inventing innovative production methods
- Issues: competitors copy the strategy, may not be perceived as equal to competitors,
competitors offer better tech, features and service, consumer preferences change.
McDonald’s achieves this through economies of scale, as they sell more than 75
hamburgers a second and feed 68 million people per day.

Apple - Foxconn is the largest outsourcing partner of electronics in the world, meaning
economies of scale is achieved on the highest level. Android vs Apple: Android phones are
cheaper to produce, apple phones and have differentiated themselves. Thus, higher
prices. Apple phones use more premium materials
Eg: Aldi, Jetstar, JustCuts
KMART vs Myer, Kmart sells cheap clothes and has lower profit margins per clothes.
Myers sells higher end clothes.

May not be sustainable in the long run unless benefits can be maintained with effective
marketing, finance and human resources strategies.
Good/service differentiation: differentiating its products rather than aiming to be the
lowest supplier.
- Uniquely different to its competitors
- Achieved through: better quality, incorporation of new technology, clever design
Risks: competitors can imitate the market leader’s innovations and consumer
preferences can still change

McDonalds- differentiation of experience (new ordering booths and screens).

The production of Apple products happens in multiple factories across mainland China.
By using economies of scale, Apple are able to achieve cost leadership. Long assembly
lines with little automation being the key to very short work times with a move towards
automation in the future. Apple differentiates through iOS operating system, touch
screen, distinctive appearance, iTunes, apps, premium product with premium price,
iTunes, iPods, docking stations, genius bars and online booking system.

Zara produces carbon copies of big names’ fashions to create products that are cheap
and of a high quality. They do this by limiting outsourcing, resulting in better quality
control and getting new products in stores quickly (nothing is warehoused for more than
72 hours). They do not use any advertising meaning that prices are reduced on products
and new clothes are brought in twice a week to shelves. It is a business built on speed
and design for addiction.

Cross branding examples include Coles- Shell alliance, Fly buys (Woolworths) and Qantas
and McDonalds and Coke.

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 20

Goods and/or services in Manufacturing produces tangible goods, service based industries are intangible.
different industries Manufactured goods are very capital intensive, services are labour intensive.
Manufacturing produces standardised goods, services are easy to customise (although
they can also be standardised), however productivity is harder to measure due to each
service being different for different customers. Manufacturing goods has become
automated with CAD and CAM.
Operations in service-based industries require people skills and good HR management is
important due to labour-intensive nature.
Standardised Goods are those that are mass produced. They have a standard and
predetermined quality. Customised Goods are those that are varied according to
customer needs. Their focus is on market rather than production. Perishable Goods are
those that can only be kept for a short time and need to have specific processes. Non-
perishable Goods are those that can be kept for extended periods of time.
Examples of services include financial advice, doctor’s consultation and being
represented in court. Examples where customers consume the service include a hair
salon. An example of a standardised service is going to a dentist and asking for a check-
up and clean. This becomes customised when the person needs an operation, filling or
braces (these are adapted specifically to the customer’s needs).

Apple products are mostly standardised (mass produced). Customers can customise
standardised goods through apps, music etc. Apple supplies goods and services- Apple
genius bars provide customised after sales service. Online booking system for Genius bar
provides an element of self service.
Interdependence with Each part of the business relies on a constant flow of information between the other key
other key business business functions to operate effectively.
functions - Marketing identifies the nature of goods customers desire and encourage
purchased. Operations supplies these products that has the relevant features
and distribute the product to the market
- Finance managers create budgets and makes funds available. Operations must
use these funds as well as ensure costs are minimised to maximise profits
- Human resources ensure employees with relevant skills are available, as well as
manage and reward these employees. Operations use these employees to allow
the work to be done.
Apple:
Operations/marketing: market research from previous sales of iPad provided Apple with
benchmarks for iPad mini sales (how much to produce). Operations provide marketing
department with costs for production of the iPhone 7 as to determine the price of the new
iPhone
Operations/finance: apple allocates a price per unit for production of iPhones, which is
pays outsourcing partners (Foxconn).
Operations/human resources: Apple tend to hire technically savvy staff from product
development to retail staff. Foxconn employed an extra 10,000 factory staff to meet
production of the iPhone 7 in 2016

Apple cut production of the Iwatch and Iphone X due to lower demands. This shows that
marketing and Operations are closely linked. If the demand is less, production for it will
decrease (otherwise there are too much stocks of it)

Go pro cuts drone production entirely, due to weak demand. “extremely competitive
aerial market,”
Influences

Influences: present both Globalisation

opportunities (expand - The economic integration of the world’s nations
into global markets) and - Allows businesses to source imports from around the world and export around the
threats (more world
competition) and leads to - Influences that have driven globalisation include the deregulation of financial
the business being able markets, removing trade barriers, advances in communication and transportation
to adjust to subsequent McDonald’s - more than 36,000 restaurants in over 100 countries.
changes Apple- Foxconn is an outsourcing partner in China.

Technology
- design, construction and/or application of innovative designs, methods and
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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 21

machinery
- Administrative – office technologies and software (organisation and planning)
- Processing level – manufacturing logistics, distribution quality management
McDonald’s - Online ordering systems (Menulog,UberEats), digital menu ordering boards
Apple - Constant innovations in technology.

Quality Expectations
- How well designed, made and functional goods are and the degree of competence
that services are organised and delivered
- Quality and expectations are linked as customers have standards and their
satisfaction with the product decides if it meets expectations
- Determines the way products are designed, created and delivered
- For goods: quality of design, is the concept, materials and innovation of design,
minimising waste good quality; fitness for purpose, how well and easily does it fulfil
its purpose; durability, reliability and how easy is it to repair and maintain
- For services: professionalism of the service provider, cleanliness, layout, courtesy of
staff and care; reliability of the service provider, efficiency and competence and
levels of customisation, how well needs are fulfilled through expertise and experience
McDonald’s - expectations from customers’ “sophisticated coffee palate”

Customers expect fresher produce and vegetables. Since Aldi has improved the stores to
have more fresh food, market share has increased!
Cost-based Competition
- Fixed costs – do not change regardless of business activity
- Cost-based competition – determining breakeven point and creating cost advantages
- Variable costs – vary according to business activity level (production)
- Focuses on reducing costs while maintaining profit margin e.g. eliminating wastes,
standardised products for larger markets and produce high volume output
McDonald’s - self-service screens minimise the need for labour costs.
Aldi’s introduction to Australia. Aldi has lower prices than Coles and Woolworth’s due to
lower prices and overheads. Coles and Woolworths responded with lower prices too! They
have continued losing market share.
Government Policies
- Political decisions affect the businesses rules and regulations which directly affects
the management of all functions
- Policies change from time to time most of all in a change of government or a change
in social expectations
- Climate Change will affect operations in the future as government begins to make
policies
McDonald’s - FSANZ requires the use of HACCP e.g. meat patties go through 52 checks
before reaching the restaurant.
Legal Regulations
- Compliance Costs: expenses associated with meeting the requirements of the law
- Examples of legal regulations: public health, fair trading which influence fair trading
rules and fitness for purpose of products; environmental protection, minimising
pollution, eliminating and safely disposing of any toxic residue; work health and
safety, safe and healthy working conditions, given safe training, use of protective
equipment and work of with machines that abide by noise, pollution and safety
standards and fair work and anti-discrimination laws, dignity and respect towards
employees.
McDonald’s- Local laws impact opening hours and outdoor facilities
State WHS Act 2011, Fair Work Commission Act 2009 and Food labelling (FSANZ) SMH
2015 reported a breach in labelling – animated screens took over 1 min to show nutrition
info

Federal Australian Consumer Law 2010 (Cth) and ACCC

Apple- mobile communications and media devices laws in each country vary, changing
their compliance in each country.
Due to the issue of a lack of natural gas for emergencies, the government introduced a
new energy policy. Supply for Australia must increase and they aren’t allowed to export it
all.
Australia’s SA is embracing Solar energy, so they have worked with Tesla to build
Powerwalls and solar panels on homes.
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Bans coming in place for plastic bags! Stores must stop using them or they will be fined
$5000. Maximum fines of $20,000.
Federal Court fines Flight Centre for price-fixing - Flight Centre tried to stop three
international airlines offering cheaper fares through their own websites between 2005
and 2009, the full Federal Court said in a judgment… violated price fixing laws
Window glass company fined 1 million dollars for WHS breach. The company had been
given advice by the NSW govt but did not heed the safety instructions.
Environmental Sustainability
- Awareness for the negative effects on environment, businesses have adopted
environmentally safe practices
- Shaped around consuming resources without compromising future resources
- Two main aspects: rise in climate change and integrate a long term sustainable view
of resource management
- Businesses try to reduce and minimise waste; recycle water, glass, paper and metals
and reduce the carbon footprint

McDonald’s - reducing energy use by purchasing 132,189 pieces of energy efficient

equipment in 2014. Changing packaging to reduce waste and landfill.

Apple- in 2017 organisations said Apple takes use of “loopholes in environmental

management.”
Corporate Social The difference between legal compliance and ethical responsibility
Responsibility: open and - Following the law – the prescribed standards of behaviour, following legal obligations
accountable business and the intention and spirit of the law
actions based on - Businesses have to pay money to comply with regulations and to go further costs the
respects for people, business money however demonstrating ethical responsibility costs the business
community/society and money but shows consumers that the business about more than profit
the broader environment. - Outsourcing: using outside specialists for specific business functions; onshore
More than just complying (domestic) and offshore (activities outside the country)
with laws and - Offshore outsourcing – take advantage of lower taxation rates, lower standards of
regulations. labour, weaker environmental and intellectual property regulations, reducing
compliance costs
Triple Bottom Line: - A business can outsource to a third party to take the responsibility for compliance.
places value on financial This allows the business to save money on compliance costs and lower costs →
returns as well social and competitive advantage.
environmental
responsibility. The driver Apple- underage labour – they audited 127 factories that hired workers under 16.
of corporate decision Suicide in Foxconn – took advice from suicide specialists.
making is not just profit
but reflects community Legally, Australian retailers do not need to ensure workers are treated right, but it’s the
concerns and social right thing to do. There are no worker protection laws in Bangladesh! On the ethical side,
expectations. all workers should be treated with respect!
http://www.abc.net.au/news/2013-06-24/australian-retailers-linked-to-sweatshop-
International Labour abuse/4773738
Organisation – advancing
opportunities for men Environmental Sustainability and Social Responsibility
and women to obtain - Policies of conservation, recycling and restoration as the principle of ecological
decent and productive sustainability forces businesses to evaluate the full environmental effects of the
work in conditions of operations.
freedom, equity, security - The changing awareness is changing management practices as the expectations
and human dignity want products to be clean, green and safe
The ILO ensures - Socially responsible businesses try to achieve two goals simultaneously: expanding
employees are not taken the business and providing for the greater good of society.
advantage of by - It recognises that business activities impact on society and that the main theme is for
international businesses businesses to go above and beyond making a profit and obeying the law.
to obtain cost leadership - Customers react to a business’s social standards and can stop buying a business’s
with cheap labour. product if they learn that the business is exploiting employees, accepting bribes or
polluting the environment.
- When a business is being socially responsible customers purchase more products.
- Socially responsible business behaviour costs money in short term but in the long run
is beneficial for the business.
McDonald’s - make sure they conduct themselves in a way that “contributes to the
development of sustainable agriculture and food manufacturing processes.”

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Woolworths stops offering single use disposal plastic bags (which get blown around and
found in the ocean). Society has changed to value the environment more.
Woolworths - reverse vending machines for plastic bottle and can recycling; reducing the
impact of their operations and looking more socially responsible.

Operations Processes
Inputs These are resources that are changed throughout the operations process and converted
Transformed resources into something else. They include:
Inputs: the raw - Materials → the raw ingredients, components, parts and suppliers used up in
materials, components operations
and parts used to - Information → Used to make plans, execute operations and keep controls over
produce a good or material inputs
supply a service - Customers → Customers can be changed in different ways. They are also an input
because it’s their needs and desires that ‘drive’ the operations of a business
Value Adding McDonald’s - materials and information.
Costs are incurred McDonald’s - 100% Australian beef
when something - 430 mill buns
created by - 90 mill eng muffins
manufacturing is - 100 mill kgs potatoes
processed or when a - 25 mill kgs beef
service is created Information - McDonald’s- customer satisfaction data

Inputs that Apple use include:

Materials → touch screens, memory chips, circuitry, speakers etc. from 748 suppliers
Information →
Customers →
Transforming resources Information is transformed into services via people in a bank. Information such as your
details, requirements and your needs are the transformed resources. Transforming
resources would be the people who talk to you, the computers that are used!
These remain within the business and are applied to the inputs to change them and add
value. They do the transforming and make the change happen
- Human resources → the skill, knowledge, capabilities and labour of people are
applied to materials to convert them into goods and services
- Facilities → they are the buildings, land, equipment and technology that business
uses in operations. They are the non-current assets of the business
Human resources M- Aus employs 100,000 people
Facilities McDonald’s - more than 36,000 restaurants in over 100 countries.

Human resources →in 2018 Apple was responsible for creating and supporting 1.9 million
jobs.
In 2019 McDonald’s employed 103,000 people in Australia
Facilities – in 2018, Apple had 18 final assembly plants around the world and 200
suppliers
Transformation The term ‘transformation’ implies physical changes, but also includes the conversion of
processes resources into services. The transformation process differs from manufacturing and
Transformation: the service businesses (due to the difference in production of tangible and intangible goods).
conversion of inputs McDonald’s - combining inputs into hamburgers/meals
into outputs

Volume Volume refers to the amount of product to make. Volume flexibility refers to how quickly
the transformation process can adjust to increases or decreases in demand. Lead time is
the time it takes for an order to be fulfilled from the moment it is made.

Low volume, high variety = Ferrari (takes lots of people hours)

High volume, low variety = Normal cars (capital intensive)
Visibility: people don’t normally see factory operations, but they do see food cooking.
McDonald’s - 2019 69 mill customers visited McDonald’s each day.

Apple - The smartphone market is competitive and subject to rapid change in product
design and demand. Predicting volume required involves risks and costs such as over-
ordering components.
Suppliers like Hanson Metal Factory have the ability to adjust for changing volumes by
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simply adjusting staff numbers and re-configuring tasks (shifting labour, space and
equipment). This in turn speeds up lead times.
Variety Variety refers to the number of different models and variations offered in the products or
services. Low variety operations are routine in producing high volume of standardised
product with a low cost. A business producing a high volume of products with low variety
will be capital intensive, with assembly lines and a focus on producing the lowest cost per
unit.
McDonald’s – has simplified its menu in 2019

Apple has suppliers in Asia and South America who specialise in the production of
particular parts and products. The supply chain of over 300 suppliers in China allows Apple
to produce high volumes of electronics but still provide customers with variety of choice
(value adding).
Variation Variation can occur according to the day, season, holidays and time of year. Where there is
a steady, predictable level of demand with little variation, operations will be similar to
those that produce low variety and high volume. Where there is volatility in the pattern of
demand, operations will need to be highly flexible.
In 2016 the demand for the iPad Pro exceeded the initial supply during the launch. The
ability to produce more iPad Pro in a short period of time to meet the excess demand
depended on the suppliers and the ability to adjust to their operations.

Visibility (customer Customer contact may be direct or indirect. Direct contact refers to customer feedback
contact) given through surveys, interviews, warranty claims, letters, wikis and blogs and verbal
contact. Indirect feedback comes through a review of sales data that gives an indication of
customer preferences and market share data.
McDonald’s- values direct contact.

Customer contact and feedback is important to the improvement of Apple product. The
iPhone 6 has two versions with many of the glitches which appeared to be in the 6 were
not evident in the 6s.
Sequencing and Sequencing refers to the order in which activities in the operations process occur.
scheduling Scheduling refers to the length of time activities take within the operations process.
Sequencing – the order
in which activities in the Software is often used to plan out processes and work flows. This is usually done on
operations process Microsoft project.
occur McDonald’s- allocates 20 secs to assemble burger and 10 secs to wrap.

Scheduling – length of The order delivery sequence or the critical path analysis of purchasing the Apple iPad pro
time activities will take is:
within the operations Processing – Apple website sale, verification and notification,
process manufacturing/customisation
Delivery (lead time) – consolidation (Fed-Ex scheduled), transfer (Transpacific Cargo
flights), deconsolidation (final hub and local trucks). Apple have tracked order-delivery
sequence (length of time) of delivering an Apple iPad at 12 days, 18 hours and 8 minutes.
This lead time is used as a scheduling and planning tool for management.

Gantt chart Refers to the activities that need to be performed, the order in which they need to be
performed and how long each activity is expected to take. The two advantages of a Gantt
chart are:
- It forces a manager to plan steps and times taken for each step to complete a
task
- It makes it easier to measure actual progress against planned progress.
Critical path analysis This refers to the most efficient way to complete all tasks in a process. This allows a
business to determine the order that tasks can be completed and which tasks are done
simultaneously. It gives direction and organisation, provides overall coordination and
enables a means of control.

Apple- uses CPA in assembly.

Technology Technology is used to speed up processes, enable full utilisation of the raw materials,
makes processes more cost effective and allows small business to trade globally.

Process technologies = RFID, automated production lines (e.g. Tesla)

Product technology = finger print scanner on iPhone… Face ID

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Zara have automated factories, robots do the work non stop, 24/7
EFTPOS, computer, keyboard and mouse, data storage, modem, printer and mobile
telephones

Office technology enables people to:

- Do more work in less time
- Work from home
- Do a greater range of tasks
Manufacturing technology include:
- Robotics: allows precision and accuracy and are efficient providing a consistent
standard
- Computer-aided design: allows businesses to create product possibilities and
generates 3D diagrams from a set of parameters. This allows material usage to be
calculated, time for the task to be completed and an estimation of price of
production.
- Computer-aided manufacturing: allows the manufacturing process to become
computer controlled. When linked with CAD it allows the instantaneous
manufacturing of designs that are accepted by clients. CAM is also used to broadly
calculate how much of each input resource would be required.
McDonald’s- use of automated drink dispensers and order screens, to improve speed,
accuracy and reduce waste.

Apple suppliers use automation to compensation for unskilled and/or inexperienced

workers, eg placement of small components that are difficult to perform and error prone.
With the introduction of new products such as the Apple watch, automation is being
gradually added.
Task Design Involves classifying job activities and breaking down work into a series of jobs that
contributes to the final goal. A job analysis is carried out to improve business productivity.

McDonald’s - each stage of burger assembly is designated a completion time, and there
are set steps for each process.
A skills audit helps to complete the production of the iPad Pro in the most efficient and
effective timeframe. Recruitment of staff is based on specific duties selected for
employees, eg unskilled workers have specific functions with no shared tasks. They are
highly supervised and the speed of work is quick.
Process Layout Also known as facilities layout planning and aims to have an efficient flow of resources
through the business. Process layout is where all machinery is arranged by what they do.
The product moves through the departments, depending on what process is needed. This
is to allow for customised products (eg, a customer may want a cabinet with a certain
number of shelves with a certain size and this can be accommodated through process
layout). Product layout is when a product moves along a standard production line.
Apple suppliers use a product layout for their manufacturing. Mass production with high
volumes involve unskilled labour to form long assembly lines with little automation and
very short work times.
Monitoring This is the process of measuring actual performance against planned performance. Key
performance indicators are predetermined variables that are measured so that appropriate
controls to operations processes can be made.
McDonald’s - measured and recorded drive-thru wait times, that show a certain colour for
how long (red=too long), these are recorded and create a performance report for
managers.

With Apple suppliers, there is a high level of supervision as workers are unskilled and line
configurations of tasks need continual monitoring and control checks to improve time
management, minimise poor process flows, assess and meet KPIs and improve quality,
cost and efficiency.
Control Control occurs when KPIs are assessed against predetermined targets and corrective
action is taken if required.

Apple has the capability to customise Iphone colours and deliver high quality phones at a
quick speed. They also adjust the speeds of processes when necessary, e.g. slowing down
production due to scratches. Quality control checks were added!
Improvement This refers to systematic reduction of inefficiencies and wastage, poor work processes and

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the elimination of any bottlenecks. Areas that seek improvement include time, process
flows and smoothness of transitions, quality, cost and efficiency.
McDonald’s - managers take remedial action once receiving these reports.

The iPhone 6 has a precision metal band, which is prone to scratching. Continuous
customer feedback and frustrations about receiving new products with scratches have led
to tighter production standards and tougher quality test and controls. Subsequently longer
lead times were a result.
Outputs These are the final good or service that is delivered or provided. Waste, defective products
Outputs: produce and worn-out machinery is considered a secondary output. They must always be
outputs that have a responsive to customer demands.
value to customers that - Customers understand the difference between the physical product and service
is greater than the cost provided by the business
of its inputs (final - Customer service can be a competitive advantage for goods-based businesses
products)
McDonald’s- 2017 Standards of Business Conduct (Promise of the Golden Arches), “We
place the customer experience at the core of what we do.” They also provide feedback
surveys, which offer free products as a reward.
Customer service Customer Service
- Intangible output – extensive contact with the customer, labour intensive and
immediately consumed – difficult to measure
- Can be a competitive advantage when one is not achieved with a better or cheaper
product
- Features: handling customer returns promptly, answering questions and providing
information, communication, anticipating customer needs, dealing with enquiries and
complaints, using technology
- Technology - changes the way customer service is delivered, reduces sale staff needs
- Good customer service - higher prices and lessen the need to reduce costs elsewhere
- Combine excellent customer service - a high quality good - a premium price in the
market and still achieve market share.
- Measured by number of customer complaints
Apple takes a holistic approach – Apple aims to exceed customer expectations before,
during and after the purchase of their products.
They have plenty of retail staff to assist them with technical advice, packaging - all
products have technical and product support information; Genius bars and online
operators are available to customers following the purchase
Knowledgeable, friendly customer service at the Apple Store.
Bunnings – knowledgeable friendly people
Warranties - An assurance that a business stands by the quality claims of the products they make
and provide
- Australian law – level of quality relative to the price and product description, suitable
for the purpose or job, match the product description in ads, free from defects and
faults
Apple aim to minimise claims by creating quality products. All Apple products have a 1 year
warranty. There are options for consumers to purchase longer warranty periods. If Apple
products are genuinely faulty customers concerns can be voiced at Genius bars, assessed
by technical staff and replacements are made.
Apple will give you 1 year warranty for phones at no added cost.
Camera stores give you 6 months warranty!
Performance objectives Performance objectives are goals that relate to particular aspects of the transformation
Performance process. They aim for the business to be more efficient, productive and profitable. The
Objectives: goals that performance objectives are:
relate to particular - Quality
aspects of the - Speed
transformation process, - Dependability
they allow the business - Flexibility
to become more - Customisation
efficient, productive - Cost
and profitable. McDonald’s has strict performance objectives to whilst processing food.

To be an Apple ‘Authorised Service Provider’ the following performance metrics have to be

met
- Quality - first time fix – providers must successfully repair products the first time

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- Speed (repair turnaround time) must be quick

- Dependability – refers to the number of days it takes to ship in a replacement
part. Plan for a lead time on the repair to manage customer expectations. It needs
to be consistent for all customers.
- Customisation – the ability to provide a service to suit the customer’s needs
- Cost – (parts per repair) measure the average number of parts used per repair so
fixed and variable costs can be monitored
Quality This is determined by consumer expectations, which inform the production process. The
three main aspects of quality are:
- Quality of design: Businesses need to determine the quality of their product. High
quality products add cost and this will reflect in a high price that consumers may
not want to pay.
- Quality of conformance: how consistently products meet specifications set out,
regardless of the standard of these specifications
- Quality of service: how reliable a service is, how well the service meets the specific
needs of the client, how timely or responsive the service delivery is
McDonald;s
Quality - follows a strict HACCP plan, which “demands strict procedure.”
Beef patties go through 52 checks before arriving at the restaurant.

Speed This is the time it takes for a business to respond to changes in market demand. Goals for
speed include:
- Reduced lead times
- Shorter lead times
- Faster processing times
McDonald’s - sets out the allotted time for each procedure e.g. 20 secs to assemble the
burger and 14 secs to wrap the burger.
They redesigned the drive-thru ‘footprint,’ which shaved 6 secs off times, allowing 15 more
cars to be served per hour.
Dependability This is how consistent and reliable a business’s products are. This can be measured by
warranty claims made (goods) and number of customer complaints received (services).
Flexibility This is how quickly operations processes can respond to changes in the market. This can
be best achieved by increasing the capacity of production, which can be achieved through
the following for goods:
- Using machinery better
- Changing the design to broaden variety
- Using new technology
For services, the following can be used:
- Increase of number of service providers
- Increase of skills of service provider
- Improving technology within providing the service
McDonald’s - the large scale of production, and the concept that many ingredients are
used for a variety of products allow McDonald’s operations to be flexible for each order.
Customisation The creation of individualised products to meet the specific needs of the consumer.
McDonald’s introduction of ‘Create Your Taste,’ which provided 38 gourmet ingredients,
which can be selected for a “burger as unique as you.” – was withdrawn as it compromised
on McDonald’s objectives of speed and cots
Cost This refers to the minimisation of expenses to ensure operations are conducted as cheaply
as possible. As a business establishes operations, costs incurred determine the price of
the product. Over time, a business aims to become more efficient, thus reducing costs.
McDonald’s -use of self-serve checkouts, which reduce the need for staff, and therefore
wages, and prevent the issue of increasing wages.

Quality: LG used to be known for bad products, now they are known for good products!
Speed: Woolworths Self checkouts – quicker shopping
Dependability: Some airplanes are known for being a little bit unreliable (Jetstar)
Flexibility: E.g. Banking, processes change depending on needs
Cost: More or less fixed costs?
New product design There are two approaches to this:
and development - Developing products according to the preference of consumers (consumer
New product or service approach)
design and - Developing products according to advancements in technology and allowing
development: the consumers to access that technology (technological approach).
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creation, or design and

development, of new Considerations when developing a new product include:
products. The design, - Supply chain management: materials may extend the range of suppliers sought
development, launch and the timing and volume of supplies
and sale of new - Quality: consumer expect a certain quality with certain features
products, enables a - Capacity management: a new product may increase the use of present resources,
business to grow and to or require an investment in new technology
attain a competitive - Cost: keeping cost of production low and charging the right price to consumers is
advantage. vital.
Developing a service requires consideration of explicit services (the tangible aspect of
performed service) and implicit services (the intangible emotional feeling attached to the
completion of the service).
McDonald’s - constant introduction of new products, including “Create Your Taste,’ which
aimed to make the experience similar to a restaurant.

Removal of the second slice of cheese form the double cheeseburger in 2008, which
reportedly saved McDonald’s US$279 mill.
Addition of free wifi, which improved the service provided by McDonald’s.

Apple Watch 2015/16 – market research, product concept and development was based
on customer feedback and innovation of the products Apple developed and launched – the
Apple Watch was based on the concept of customers wanting more convenience

Apple and Samsung keep coming up with new devices (iPhone, tablets) in response to
each other as they want to maintain the business advantage.

Telstra and 4G/5G. Telstra has been leading the charge for 4G deployment all over Aus
(greater speeds)
Supply chain This involves integrating and managing the flow of supplies throughout the inputs,
management transformation process and outputs to best meet the needs of the consumer.
Supply Chain McDonald’s - with 38,000 stores - uses independent distribution companies to allow them
Management: to focus on operations.
integrating and
managing the flow of CostCo, Woolworths are building warehouses and distribution centres to improve logistics
supplies throughout the in Sydney. Kemps Creek is halfway from Sydney to Canberra.
inputs, transformation
processes and outputs
to best meet the needs Woolworths will invest up to $780 million in new automated and semi-automated grocery
of customers distribution centres in NSW. The investment covers a fully-automated regional distribution
centre and a semi-automated national distribution centre at Sydney’s Moorebank Logistics
Park. It follows a difficult three months for Woolworths, in which it was forced to suspend
delivery and click-and-collect services for a month in response to panic buying to free up
delivery resources.

The “state-of-the-art" facilities will use the same “semi-automated and automated
technology deployed at Woolworth’ Melbourne South Regional Distribution Centre”, which
has been operational for the last year. The warehouses, which will both be operational by
2024, will replace Woolworth’s existing regional distribution centre at Minchinbury and
national distribution centre at Yennora, as well as the Melbourne national distribution
centre.
Sourcing including This involves the purchasing of inputs for the transformation process. Global sourcing
global sourcing refers to businesses purchasing supplies or services without being limited by location.
There are multiple advantages and disadvantages to global sourcing Factors that
influence purchasing include:
- Consumer demand
- Quality of inputs required
- Flexibility and timeliness of supply
- Cost of supplier
McDonald’s - outsources its IT management, inputs and logistics, allowing them to
increase focus on vital sectors of business, however cause them to lose control of
processes e.g. meat scandal 2014 China.
E-commerce This is the buying and selling of goods over the internet. E-procurement is the use of
online systems to manage supply and allows suppliers direct access to a business’ levels
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of supplies. This is enabled through a business-to-business arrangement (B2B). E-

commerce is used by customers because it is easier and generally cheaper than selling in
person. Business-to-consumer (B2C) refers to selling products over the internet, usually
with payment by credit card.
With the help of Apple.com, sales increase every year. Apple discovered it was more
economical to transport goods directly from Chinese factories to consumers’ doors by air
rather than incur material handling and packaging costs.
Logistics This refers to distribution but also includes:
- Transportation
- Storage, warehousing and distribution centres
- Materials handling and packaging
Distribution refers to the various ways of getting a good or service to a customer. There are
many models for this (See book). Transportation and distribution refers to the physical
movement of inventories. The type of product and cost determine which mode of transport
is used.

Storage involves finding a secure place to hold stock until it is required. It can be long or
short term.

Warehousing is the use of warehouses for the storage, protection and distribution of stock.
Distribution centres are intended for short term storage of stock and are strategically
located to reduce time it takes to supply stock to retail outlets.
McDonald’s - with 36,000 stores, McDonald’s uses independent distribution companies to
allow them to focus on operations.

Apple exerts control over nearly every piece of the supply chain, from design to retail store.
Because of its volume, Apple gets discounts on parts, manufacturing capacity and air
freight.
Outsourcing Outsourced Processes
Outsourcing: use of - Legal process, human resources, administrative work, information technology, finance
external providers to and accounting, marketing, knowledge process
perform business Choosing Outsourcing
activities – done at a - Cheaper and more efficient
lesser cost and with - Best geographical location
greater effectiveness - Suppliers/vendors to use
- Management of the outsourcing contract, the length of the contract, the KPI’s and
service levels required
Advantages
- Simplification – reducing the number of activities performed
- Efficiency and cost savings, cheaper labour, skilled labour
- Increased process capability
- Increased accountability
- Access to skills/resources outside business
- Able to focus on core business or key competencies
- Strategic benefits
- Improvements to business performance
Disadvantages
- Payback periods and costs
- Communication and language
- Loss of control standards and information security
- Hierarchies
- Organisational change and redesign loss of corporate memory and vulnerability
- Information technology
McDonald’s outsources its IT management, inputs and logistics, allowing them to increase
focus on vital sectors of business, however cause them to lose control of processes e.g.
meat scandal 2014 China.

Apple has an operational edge over other brands as they are able to handle large product
launches without having to warehouse and maintain large inventories which can harm
profits. Apple products are in high demand – production levels need to be flexible, lead
times need to be quicker than others and costs need to be competitive.

QANTAS has outsourced its maintenance for 474’s. Part of some measures to save costs

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and have more leverage.

Australian telecommunications outsourcing Call centres to save money. The quality has
gone down, but it saves a lot of money. The minimum annual award salary for a full time
contact centre agent (working 38 hours) in Australia with no penalty rates is $39,9265
(August 2017) and that’s assuming you can find someone willing to work for it with starting
contact centre salaries often in excess of $50,000 compared to the average $5,573
AUD a customer service agent working in the Philippines would receive.
Technology Technology can either be leading edge or established. Leading edge is the most advanced
Technology – leading or innovative technology at any point in time. This creates a benchmark for other
edge and established: businesses to compete with and ensures products are made quickly to a higher standard
can help create a with less waste and more efficiency. Established is widely used and accepted without
competitive advantage, question. These include things such as computers. They help establish basic standards for
some businesses productivity and speed.
innovate and create McDonald’s - automated soda dispensers, and self-serve screens.
new technologies – Leading edge - In 2019 McDonald’s invested AU$420 milion on decision-logic technology
crucial part in business to personalise the electronic menu boards on factors such as weather (eg suggesting cold
success items on hot days and coffees on cold days)

Apple - Leading edge

Established – iOS – the operating system that runs on iPhone, Mac and iPad devices.

Leading edge = Telstra and it’s 4G/5G trials for mobile Internet
Established = Standard Internet plans and copper wire networks
Inventory management This involves the management of stock. The inventory turnover ratio attempts to
Inventory Management: mathematically link the number of items sold within the given time period and the amount
the overseeing and of stock needed to be held to meet customer needs. Improved communication, transport
controlling of the and electronic stock monitoring systems help to maintain low inventory levels. Three
ordering, storage and methods to manage stock include:
use of materials used in - FIFO (first in, first out): this means that the first stock in is the first to be sold. This
production as well as is used in supermarkets where the products have use-by dates
quantities of finished - LIFO (last in, first out): this means that the last stock to come in is (said to be) the
goods. first to be sold. USUALLY THIS DOES NOT ACTUALLY HAPPEN IN PRACTICE - IT IS
INSTEAD A METHOD OF ACCOUNTING. As costs of inputs gradually build up, at the
Inventory – amount of end of an accounting period the business may value its goods at their “last cost
raw materials, work-in- price”, rather than their “first cost price”. This will reduce the “profit” said to have
progress and finished been earned by the business (and reduce the amount of tax the business has to
goods that a business pay). Reduced tax paid means more profit for the business.
has at any one time. - JIT (just in time): this means that stock is ordered only as it is required. This is
useful as it reduces holding stock (holding stock costs money to store and stock
In an Exam – JIT – may go out of date).
simple to explain and McDonald’s - check and monitor materials expended by the business, to accurately
logical forecast the inventory needs, allowing them to minimise the stock held by the business.
FIFO – when the Just in Time – used by making food to suit orders.
business has products FIFO used for all inventory.
that are subject to an
expiry date to fashion Apple - High inventory turnover means the number of days the inventory is warehoused is
changes or are very low (5.3 days compared to Dell 10.2) for Apple suppliers. Just in Time is employed as
perishable once products are ordered online the product is shipped directly from China. This reduces
Also suggest a lead times, demands are met quickly and Apple avoids damage or warehousing costs and
combination of FIFO it minimises the chance of stock becoming obsolete.
and JIT
Toyota uses JIT and just orders materials when they need it (gets orders from
customers). Less piled up stock and written off items.

Woolworths uses FIFO for fresh fruit and consumables. This is because vegetables go bad
and old, so the fresh stock must go out first.
Quality management This is the processes that a business undertakes to ensure consistency, reliability, safety
Quality Management: and fitness of purpose for a product. The three approaches to this are:
processes that a - Quality control: inspection, measurement, intervention
business undertakes to - Quality assurance: application of international quality standards
ensure consistency, - Quality improvement: total quality management and continuous improvement
reliability, safety and Apple requires rigorous quality assurance from its suppliers. Control checks – Apple has a
fitness of purpose of secure online database that is regularly updated on current and potential suppliers. In
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product. 2017 Apple conducted 633 audits covering over 1.6 million workers.
Quality – the degree of
excellence of a product
or service, and its
fitness for a stated
purpose
Quality control This reduces problems and defects in the product by using inspections at various points in
the production process. Once standards have been set, there needs to be a range of tests
designed to assess the quality of products and processes against the standards. This
reactive approach needs to be balanced against a more proactive approach that
encourages a continuous improvement model. To ensure outputs meet required
standards, businesses may carry out inspections of part or all of the total volume of
production. When an inspection is conducted, the goods or services under inspection can
be passed as ‘okay’ or ‘defective’. This is an ‘attribute inspection’.
McDonald’s - checks levels of freshness and bacteria of food.
Quality assurance This involves the use of a system to ensure that set standards are achieved in production.
This is done through taking a series of measurements and assessing them against
predetermined quality standards. This tests ‘fitness for purpose’ and the desire to achieve
‘right first time’. A series of quality assurance standards has been developed in response
to the impact of globalisation and the international emphasis on quality.
McDonald’s - Supplier Quality Management System (SQMS), that applies to sources of
inputs, to ensure they are of high quality.
Quality improvement Continuous improvement is the belief that over time processes will be made more efficient
and effective. The basis of successful improvements in quality is the inclusion of staff into
improvement processes.
Total quality management involves quality being a commitment and responsibility of every
employee. It is an ongoing, business-wide commitment to excellence that is applied to
every aspect of the business’s operation. The achieve TQM objectives requires four
elements: benchmarking, employee empowerment, a focus on the customer and
continuous improvement.
McDonald’s - all aspects of the business adhere to a strict HACCP plan.
Overcoming resistance This is about ensuring that employees embrace changes that occur within the business.
to change Resistance to change arises from two key principles: financial, psychological/emotional.
Overcoming Resistance Thus the business must be aware of the reasons for resistance to change and come up
to Change: forces with appropriate strategies to overcome this. The 6 reasons for resistance to change are:
driving change can be - Financial costs
countered by forces - Purchase of new equipment
that are resistant to - Redundancy payments
change – can be - Retraining
external elements but - Reorganising plant layout
mostly located in an - Inertia
organisation’s internal Financial Costs – changes need to be cost effective
environment Purchasing New Equipment
- Consider future operating and maintenance costs as well as the purchase price to
avoid inefficient and costly production
- The equipment must be essential and if there is any other way
- Strategies: outsource components to businesses that already have the technology,
leasing – business has the equipment bus it is financed, paid for and owned by a
separate organisation
Redundancy Payouts – terminated by the employer as no longer needed or less people are
needed
- Amount of payout is determined by award or agreement that has been negotiated
- Strategies: shareholders for additional cash – explaining redundancies will improve
productivity and competitive position, effectively plan so finance can be raised over a
long period
Retraining – employee acquiring new skills
- Business can keep staff they rely on and know the business
- Costs for retraining such as time and cost
- Strategies: change culture of business to embrace change so there is always
improvement
Reorganising Plant Layout
- new structures and new equipment – moving people around and organisation’s
equipment

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- new technology or new products can suspend production

- may involve constructing new buildings or renovating existing plants- expensive
- Strategies: stakeholders know that changing plant layout will result in more efficient
process and bottlenecks will be avoided, Australian government makes grants to
ensure as many jobs as possible are retrained
Inertia of Managers or Owners – persistent resistance of managers to change
- Maintain the established organisational links, the internal dynamics and structures
that have developed
- Change may set the organisation on an uncertain path, increase risk of failure and
costs of production
- Strategies: change management team to people who share the vision

Managing Change Effectively

- Proactive – they initiate change rather than react to events
- Reactive – those who wait for change to occur then respond to it
- Change must: occur at a pace suitable for the business, evaluated for the possible
impact (can result in employee resistance, tension and lost productivity) and
introduced into a workplace that supports employee participation
Change Management Steps
1. Identify change and necessary adjustments that needed to be made, sources of
change are external – responding to threat
2. Lower resistance – communicate with employees – support
3. Change agents – staff are included then more supportive
4. Apply Change models
Change Models
Unfreeze/Change/Refreeze
1. Unfreezing – forces supporting existing system, prepares organisation for change as
well as identifying need
2. Change – change begins, new procedures, systems and behaviours are identified,
communicated, modelled and practiced
3. Refreezing – change reinforced, manager offers praise and positive reinforcement
John Kotter’s Eight- Step Model
1. Establish a sense of necessity – highlight impending threats or potential opportunities
2. Form a guiding group – team of people act as facilitators
3. Create a vision – employees shared sense of direction – achieve common objective
4. Communicate the vision – to the people affected to build cohesion – dispel fear
5. Empower to fulfil the vision – people who are involved – develop change of ownership
6. Recognise and reward achievements – recognition and reward encourage further risk
taking and reinforce positive aspects of change
7. Consolidate Improvements – assemble the benefits attained into the business’s
operating procedures and systems
- Institutionalise the changes – make a clear statement between new procedures
and the success of the business
Apple continually invests in innovation and change; executive staff have been made
redundant, new equipment has been procured, change agents have been introduced and
current and new staff are continually retrained in new technology. Supply chains are
continually reorganised. Any sign of inertia from suppliers or staff is not tolerated.
Resistance results in not being a part of Apple’s future plans.

Telstra and Qantas fired hundreds of workers. Qantas restructured to cut costs and routes.
Telstra wanted to save costs on call centres.

NAB workers will be lost due to robots taking their jobs! They will given redundancy
payments!
Financial costs The main financial costs associated with change include:
- Purchasing new equipment
- Redundancy payments
- Retraining
- Reorganising plant layout
These are generally concerns held by management, although sometimes employees.
Purchasing new Cost of purchasing new equipment such as machinery and technology is considered a
equipment capital cost. These costs are generally high but can be worth it through the use of
technology reducing other costs and becoming more efficient. Goals that can be achieved

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through use of technology include normal:

- Improved processing flexibility
- Improved processing speeds and shorter lead times
- More consistency in production
- Higher overall quality of processing
- Reduced wastage and losses from equipment failure
Leasing can be an option if there are not funds to purchase equipment, however this can
have a higher long-term cost.
Redundancy payments Redundancy is defined as a loss of work arising from job skills that are no longer required
or relevant to the workplace. A redundancy payout is the money that is given to employees
when they are forced out of work because their job skills are not relevant. These are
typically high due to:
- The length of employment the employee has had with the business. Under
legislation a certain number of weeks of pay must be payed when a person is
made redundant.
- The level of pay the employee is on prior to being made redundant.
- The amount of unused leave that an employee has accumulated.
- Any outstanding wages.
The cumulative effect of redundancy payments can be high if many employees are being
made redundant in a short period of time. The other side to this as well is that employees
will resist this as they will lose their jobs.
Retraining This arises from reorganisation within the business or with the addition of new technology.
Job roles may change requiring employees with different skills. This can be achieved
through retraining. Employees and management can resist this due to the high cost of
retraining (not only the cost of training but with wage cost while not working, hiring casual
workers while the training is occurring etc.) and the inconvenience and disruption it
causes.
Global factors – global Global Sourcing – purchasing supplies or services without being constrained by location
sourcing - Sourcing of any business operations that gives the business cost advantages
- Decision made based on cost, efficiency, productivity, technical ability
- Benefits: cost advantages, new technologies, expertise and labour specialisation,
other resources and operate extended hours
- Challenges: possible relocation of aspects of operations, cost of logistics, storage and
distribution, managing regulatory conditions of nations, increasing complexity of
overall operations
Companies like Boeing source globally as countries may have expertise in it! For example,
Italian firm Alenia Aeronautica makes the center fuselage, French firm Messier-Dowty
makes the landing-gear system, Diehl Luftfahrt Elektronik supplies the cabin lighting.

Apple’s iphone uses parts from Japan (display), Korea (RAM), processor (Korea), storage
(Japan) and Wifi Modules (China). Apple has a variety of suppliers which cope with the
large volumes of production. Samsung is one of Apple’s major suppliers which supplies
multiple components, including flash memory and application processors. Despite being a
competitor to Apple in the mobile phones market, Samsung uses its supplier status to
reduce its own component manufacturing costs via bulk production. Apple’s supply chain
management sources suitable suppliers (e-procurement) which give the business costs
advantages without being constrained by location.

Economies of Scale
- Producing on a larger scale
- Sell to global market based on scale advantages
- Scale of production increases, cost per unit falls and profitability will rise
Since Holden had low economies of scale in Australia and high running costs, it had to cut
workers and couldn’t average out costs. 200000 cars need to be made for a factory to be
productive, it was at 80000 cars.

Many products are made in China because they have large factories that can enable huge
economies of scale. This is why products such as electronics, clothes and many other
things are moved over to China for production.

Apple has over 300 suppliers in China; Apple outsources large overseas production to gain
lower unit costs, economies of scale and quick lead times, giving Apple a competitive
advantage.

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Scanning and Learning

- Scanning the global environment and learning from the best practices
- Diversity of experience helps learn how to handle any issue with flexibility and insight
Companies use social media keyword scanning tools to look for trends in their pages and
customer sentiments. Instagram, Facebook and even twitter scanners exist now.

By updating their Supplier Information Database (SID) Apple is always looking for new
ideas.

Research and Development (R&D)

- Helps create leading edge technology and innovative products and solution
- Government encourages R&D – offer taxation incentives and grants
- Central aspect is ascertaining what customer want and assisting to create products
that meet their needs

McDonald’s- occurs to a great degree throughout each area. McDonald’s conducts

business within, however they have a dedicated centre for R&D in Chicago. e.g. all-day
breakfast, CYT, McCafe.
E.g. GOPRO’s Karma. They spent a lot of R & D and it was a total failure and they made
losses.
It was wasteful and consumed many resources. They lost 373 Million dollars!

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MARKETING
- How do we find out what people want?
- How do we price, distribute and promote goods?
- What are the things we need to keep in mind, when promoting or pricing?

Definition: a total system of interacting activities designed to plan, price, promote and distribute products to present and
potential customers

- To identify the group of customers that will be the focus of the marketing effort, research their needs and develop a
product to meet those needs.

Role of Marketing
Strategic role of - Translate this goal into reality
marketing goods - Develop and implement a marketing plan – sets out a series of actions or strategies
and services: profit - Viewing the business through the customer’s eyes – customer-orientated business
maximisation and
growth
McDonald’s- “to provide customers more choice and flexibility, including the opportunity to
bundle their own meals at compelling price points.”
Interdependence Marketing and Operations
with other key - Process of manufacturing a particular good
business functions: - Incorporate features that consumers will respond positively to
all plans, policies - Products are produced efficiently and on time to satisfy customers and marketing uses
and operations strategies to sell it
towards achieving Marketing and Human Resources
customer - Marketing determines the skills required for employees to produce the desired product
satisfaction - - Staff is motivated and skilled to develop products
marketing - Staff can be the public face of the business and influence the customer decision to
strategies play a purchase
huge role in all Marketing and Finance
business activities - Selling the goods and services that a business produces benefits the profitability of the
business
Marketing concept: - Determine whether the needs of its potential customers are financially viable
satisfying a - Budgets and forecasts must be established for promotional campaigns and sales
customer’s needs
and wants while
achieving the
business’s goals
Production, selling, Production Approach (1820’s – 1920’s)
marketing - Attitude towards marketing – “If we make it, they will buy it”
approaches: today’s - Production design was based more on the demands of mass production techniques than
marketing places on customer demand
an emphasis on - Marketing consisted of taking orders and delivering products
customer The Sales Approach (1920’s -1960’s)
satisfaction but this - High- quality, mass-produced products came onto the market – competition increased
has evolved from - New marketing approach – sales-orientated: to beat the competition and gain new
two different customers
approaches over - Increased spending on advertising
time - Salespeople reached thousands of consumers and convinced them to buy the product
- Most businesses were still neglecting the needs of the customer – producing what the
company could make and getting sale representatives to create demand
The Marketing Approach: Stage 1 (1960’s – 1980’s)
- Finding out what customers want – market research – satisfying that need
- Characterised by the importance places identifying and satisfying customer needs and
wants prior to producing the goods or services – motivation being able to produce what
the customer desires so they will buy it
- Marketing becomes central to all aspects of the business and satisfying customer needs
becomes the responsibility of all employees
The Marketing Approach: Stage 2 (1980’s – present)
- Changing economic and social conditions has meant a modified marketing approach
McDonald’s- 2015 CEO stated McDonald’s aims to be “customer centric.”
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Corporate Social Responsibility: external pressure from customer and environmental

organisations, political forces – major change has been increased demand for ecologically
sustainable products
- Customer Orientation: the customer relationship does not end with the sale, strive to meet
and exceed customer expectations – strive toward achieving and maintaining high levels
of satisfaction
- Relationship Marketing: High priority customer retention and continual satisfaction –
Customer Loyalty (repeat sales) – achieved through reward programs, customer care or
good after-sales services
Types of Markets: - not restricted or targeted solely to consumers
Resource, - businesses purchase supplies from other businesses
Industrial, - certain business will choose to concentrate on one section of the market, specialise their
Intermediate, products to a select group of consumers
Consumer, Mass, McDonald’s - consumer market
Niche Apple- intermediate + consumer.

Resource Markets
- production and sale of raw goods – sells to business that require materials to produce
their own goods and services
- Raw materials are traded in the resource market
- Examples: BHP Billiton (mining) and Rio Tinto (metal and mining)
Industrial Markets
- Goods that are used as supplies in the production process are traded
- Example: Toyota paid $1.6 billion to Australian companies for the supply of locally made
components for Toyota’s Australian production
Intermediate Markets
- Wholesalers - sell products to retail businesses that have been produced by other
organisations
- Wholesalers do not sell products to consumers
- Example: Armstrong Electrical Wholesalers that supplies mining, industrial, oil and gas
equipment around the world
Consumer Markets
- Sell products directly to consumers

Mass Market: aimed at all consumers irrespective of their age, gender, residential location or
income – doesn’t target a particular buyer group . Examples: petrol, electricity and water

Market Segment: one are of a particular

Examples: Radio Stations – Nova 96.9 FM devote their human and financial resources to
Australian radio stations aimed at 19-39 year olds – broad selection of music, place an
emphasis on comedy and minimise the amount of time the announces spend talking

Niche Market: still focuses on a select group of customers but the customer base is narrower –
sales are not as frequent and goods are usually higher priced
Influences on Marketing
Factors Influencing Psychological Influences: factors within an individual that affect his or her buying buy
Customer Choice: behaviour e.g. perception, motives, attitudes, personality and self-image, learning and beliefs.
marketer’s examine
the behaviour of McDonald’s - growing ‘foodie’ population of Australia, leading to higher quality and healthier
customers to see fast-foods. E.g. Angus Beef range “little bit fancy.”
what motivates the
purchases of McDonald’s - offers a “consistent national value,” delivered through Extra Value Meal menu.
products –
customer choice APPLE… Apple markets itself as cool, trendy and classy.
(buying behaviour)
– modify marketing Sociocultural Influences: forces exerted by other people that affect consumer behaviour e.g.
strategies to appeal social class, culture and subculture, family and roles and peer groups.
to the customer’s Social Class
motives – being - Socioeconomic status – education, occupation and income
aware of behaviour - Influences the type, quality and quantity of product a customer buys
then predict - Example: high socioeconomic status background buy products perceived to be prestigious
customer trends and more expensive
and how they may Culture and Subculture
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react to strategies - Culture – learned values, beliefs, behaviours and traditions shared by society
- Culture infiltrates all that we do in everyday life – influences buying behaviour
- Determines what people wear, what and how they eat, and where and how they live
- Example: greater desire for nutritious and healthy foods –low-fat, sugar-free and fibre-
enriched processed foods are produced
Family and Roles
- We all occupy different roles within the family and groups within the wider community –
influence buying behaviour
- Example: women’s roles are changing but they still make buying decisions related to
health care products, food and laundry supplies; Young people between the ages of 8 and
12 have an income of $1.8 billion, spend $550 million and influence 70% of all household
spending
Peer Groups
- Group of people with whom a person closely identifies, adopting their attitudes, values and
beliefs
- A customer’s buying behaviour may change to match the rest of the group’s beliefs and
attitudes
- Example: close friend shares a bad experience at a particular shop you could change your
buying behaviour
Economic Influences: influences a business’s capacity to compete and a customer’s
willingness and ability to spend
Boom
- A period of low unemployment and rising incomes
- Businesses increase their production lines and try to increase their market share by
intensifying their promotional efforts
- Customers are willing to spend (economic security)
- Marketing potential is large and sales respond to all forms of promotion
Recession
- Unemployment reach high levels and income fall dramatically
- Lacking confidence in the economy – if the phase lasts for a long time, pessimism persists
- Customer and business spending reach low levels
- Customers become price-conscious
- Value, functionality and longevity become more valued
- Marketing plans stress value and usefulness – goal to maintain market share – Survival
McDonald’s- 2018 report “substantially affected by economic conditions.”

Building (building material sales go up and down depending on the economy)

Government Influences: customer choice is influenced by the federal government’s regulation

of the economy
Fiscal Policy
- Actions taken by the federal government influence economic activity through the budget
- Example: level of taxation consumers pay in the form of income tax and the GST
Monetary Policy
- Reserve Bank of Australia to influence the level of economic activity through interest rates
- Interest rates are significant in determining the level of expenditure in the economy and
the level of credit that consumers and business will access
- Governments also play a social role in influencing customer’s purchasing behaviour – age
restrictions on alcohol and tobacco and censorship warnings on TV and film – promoting
social responsibility in the community
McDonald’s - Sections 1.2.8-6 of Food Standards Australia and New Zealand (FSANZ) code
requires nutritional information to be displayed.
Cigarettes - governments may increase or decrease taxes on these.

Consumer Laws: Deceptive and Misleading Advertising

improve the - Can be the most serious unfair trading practice because of the influential nature of
protection and advertising
rights of consumers - Even though it is illegal businesses can still use methods such as:
and to clarify the - fine print – important conditions are difficult to read
rights and - before and after advertisements – misled as comparison is distorted so that ‘before’
responsibilities of images are worsened and ‘after’ images are enhanced
businesses - tests and surveys – unsubstantial claims, ‘9 out of 10 people prefer the product’, when no
survey was conducted

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- country of origin – accuracy in labelling, ‘made in Australia’ and ‘product of Australia’ have
distinctly different meanings
- packaging – size and shape of package may make a misleading impression of the
contents
- special offer – can be deceptive if they imply that a special offer is available for only a
limited period, it is in fact available all the time
Most Common Deceptive Advertising
- Bait and switch advertising: advertising a few products at reduced prices – enticing prices
to attract customers. When the advertised products quickly run out, customers are
directed to higher prices items
- Dishonest advertising – advertisers must not use deceptive words or claim that a product
has some specific quality that it does not, portraying a false impression of the exact nature
of the product. Price reduction, specials, or free-gift offers must all be genuine.
Advertisements that could deceive, even though no one may actually be deceived are also
to be avoided

Coles was fined $2.5m for claiming that bread was “baked today” when it wasn’t.

More 200,000 HP Australia customers who bought certain models of HP printers were not
informed non-HP ink cartridges would not work in their printers. Those customers could now
be eligible for compensation, the ACCC announced.

Price Discrimination
- the setting of different prices for a product in separate markets
- The difference in price is possible because: the markets are geographically separated –
city and country prices, product differentiation within one market – different electricity
prices for domestic and business users
- Competition and Consumer Act prohibits price discrimination if the case could
substantially reduce competition – applies to discounts given, credits, rebates, services
and payment arrangements.
- A business cannot give favoured treatment to some customers while denying it to others
Apple, Adobe and Microsoft had different pricing in Aus for services and products. People in
Aus pay more for music, games and more!

Implied Conditions – Consumer Guarantees

- Australian Consumer Law, a single set of statutory consumer guarantees was established,
which replaced the previous system of implied conditions and warranties of the trade
practices act.
- Implied conditions are the unspoken and unwritten terms of contract – conditions that are
assumed to exist whether they were explicitly mentioned or written into a contract
- Important implied term: the product has to be of acceptable quality – acceptable in
appearance and finish, free from defects, safe and durable
- Breach of the law to suggest a product as a specific characteristic that is does not
- Example: it is illegal to state that a motor vehicle has a certain fuel-consumption
performance, when it does not.
Products are meant to do what they represent. AUDI misled the public on their cars’ diesel
emissions. The ACCC alleges that between 2011 and 2015, Audi knowingly misled the buying
public by failing to disclose it had used “defeat” devices during laboratory testing in order to
produce a lower nitrogen oxide (NOx) emission reading than under normal driving conditions.

Warranties
- All businesses have certain obligations related to the products they sell, these are
designed to offer a degree of protection to the customer if the good is faulty or if the
service is not carried out with due care or skill
- A warranty is a promise that the business will repair or replace faulty products
- Government legislation has made it necessary for businesses to state, clearly and simply,
the terms and conditions of the warranty
- Assures the customer that the business has confidence in the quality of its product and
will repair or replace any faulty items
- Can be used as an aggressive marketing tool if it includes superior options of those of a
competitive product
- False or misleading statements concerning the existence, exclusion or certain conditions
of the warranty are prohibited under the CCA

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Apple misled customers in regards to “error 53”. Consumers were entitled to a free remedy
(fix) but were told no!

Refunds and Exchanges (Returns)

- A business has to offer a refund if: products are faulty, doesn’t match the description or a
sample or fail to do the job they were supposed to do
- There is no obligation to offer a refund if the customer changes their mind, has found the
same product at a cheaper price or damage has occurred after the purchase was made
- Accurate signs must be displayed rather than ‘no refunds are given’, ‘ no refunds given if
you change your mind or if the purchase is defective’ should be displayed
Examples of Consumer Laws
The Australian Consumer Law (2011)
- National consumer law that replaced 17 existing national, state and territory consumer
laws
- Applies to all Australian businesses and consumers regardless of circumstances
- Competition and Consumer Act 2010
- Marketers need to be familiar with the laws that regulate their activities – aware of any
changes to the law and how it applies to their own business
- Introduce changes through alternative advertising promotion, a repackaging of a product
or a change in the credit policy for customers
- Must apply current laws to all marketing practices
Competition and Consumer Act 2010
- Two major purposes: to protect against undesirable practices – misrepresenting of
products, their place of production and misleading and deceptive advertising, to regulate
certain trade practices that restrict competition – ensure that a number of businesses are
operating in one market at one time to encourage competition
- Enforced and administered by the Australian Competition and Consumer Commission
(ACCC), each state and territory’s consumer agency and the Australian Securities and
Investments Commission (ASIC) in respect of financial services
Breaches of the Act
- a breach of the consumer protection provisions of the CCA can mean a civil or criminal
case is taken against the business or individual concerned
- The CCA allows the courts to impose penalties of up to $1.1 million for companies and
$220 00 for individuals for unconscionable conduct
- The consumer can sue the business for compensation - when legal fees and the damage
to the business’s reputation arte included the cost of breaching the CCA can be
substantial
- The ACCC has the power to issue on-the-spot infringement notice (fine) to manufacturers
making false claims meaning that the ACCC can fine a business for each infringement of
the CCA without having to undertake court action
The ACCC can now issue ‘public warning notices’ – warn consumers of suspected illegal
activity, previously they had to gather evidence and set up an injunction while the suspected
illegal activity
Ethical: socially Truth, Accuracy and Good Taste in Advertising
responsible, morally - Marketers are expected to engage in fair and honest behaviour in marketing campaigns
right, honourable - When promotion material is distributed this material represents information that is
and fair. truthful, accurate and in good taste.
Main ethical - The CCA prohibits supplying consumer goods that do not comply with products safety
criticisms of standards
marketing: - Concealed facts – pieces of information purposefully omitted from an ad
- Creation of - Exaggerated claims – claims that cannot be proven
needs - Vague statements – use of words so ambiguous the consumer will assume the intended
(materialism: message
an individual’s
desire to Ethical issues that arise due to online advertising include tracking of web users and using data
constantly to target them with ads.
acquire McDonald’s - advertising to children seen to be exploitation as they advertised the premium
possessions) – (toy) more than the product 2015. Given warning by American Children’s Advertising Review
use Unit. In 2019 the Australian Obesity Council made a complaint against McDonald’s Happy
sophisticated Studio app. Some businesses ensure their ads are controversial – to promote their
and powerful business/product but it also encourages the media to facilitate debate regarding the nature of
promotional advertisement. Example: PETA (anti-fur ads)
strategies - Taste in advertising is difficult to judge because an individual’s image of an ad may differ

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persuade and from another individual

manipulate Products That May Damage Health
customer - The marketing of junk food is constantly criticised by nutritionists and health advocates,
- Stereotypical especially as childhood obesity rates are rising
images of - An issue involving children in advertising is the sexualisation of children
males and - Examples: harmful products include sale of cigarettes and alcohol, restriction on tobacco
females – sponsorship and entries into casinos
males McDonald’s - concerns of health led to reduction in sugar in buns by 5% and sodium of cheese
portrayed as by 20%.
worker, females Engaging in Fair Competition
as the - The amount of competition in the marketplace can be intense, there is a possibility to
housewife engage in unfair marketing strategies – consumer exploitation
- Use of sex to - Examples: advertisements that make false promises or are highly exaggerated, incomplete
sell – overused product descriptions and manipulative, high pressure selling methods
of sexual - Consequences can be that consumers feel cheated and stop buying the product, they
connotations to made decide to complain to relevant government policies which causes long term damage
sell products to the business reputation and bad publicity
- Product ACCC opposes the acquisition of petrol stations by Woolworths due to the fact that it would
placement – reduce competition. It would be bad for fair competition and result in a monopoly.
advertising in Sugging
entertainment - Setting Under the Guise of a Survey is a sales technique disguised as market research
- Invasion of - Results has been that less people are taking part in market research because of increased
privacy – awareness of sugging
tracking of web - This technique is legal but raises ethical issues, including invasion of privacy and
users and using deception
this information
to target them
with
advertisements
– collection of
data may
breach
consumer
privacy
Marketing Process
Situational Analysis: Business examines such areas:
provides the firm - Market share of its product
with an opportunity - Future trends within the market
to examine its - Strategies used by competitors
current position - Changing consumer laws and preferences
within the market SWOT Analysis
- Identification and analysis of the internal strengths and weaknesses of the business
- The opportunities in and threats from the external environment
- Provides the information needed to complete the situational analysis – clear indication of
the business’s position compared with its competitors
Situational analysis Strengths: reputation, staff, service quality, after-sales service, technology and brand name
Market research
Establishing market Weaknesses: some staff not innovative, technology outdated, customer complaints, poor
objectives locations outdated products and poor image
Identifying the
target market Opportunities: new markets (especially global), low interest rates, takeover or merger
Developing possibilities and new technologies
marketing
strategies Threats: competitors, new taxes, change in customer preferences and economic trends
Implementation,
monitoring and McDonald’s SWOT -
controlling Strengths – Internal
• Diversified income stream
• Goodwill
• High quality standards with product specifications
• Well-known global brand
• Largely uniform menu with some geographic variations

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 41

• Extensive access to capital

• Market share
• International lead markets such as Australia, Canada and the UK
Weaknesses – Internal
• Lack of central control over daily operations of franchised restaurants
• Protecting the intellectual property of its business and ensuring the company does not
infringe on the intellectual property of others'
• Poor operating performance
Opportunities – External
• Innovation and differentiation of the McDonald's experience
• Reinvest in restaurants
• Anticipate and respond to changing consumer preferences
• Utilise digital media advertising

Threats – External
• Intense competition
• Negative publicity
• Increased governmental environmental protection
• Commodity price increases
• Economic conditions and trading volatility
• Food safety breaches
• Competition from Burger King Worldwide Inc, Domino's Inc, Yum! Brands Inc,
Starbucks Corporation, Wendy's Company
• Increase in wage costs
• Trade union action and industrial disputes
• Increasing legal complexity and litigation
• Changes to accounting standards or changes to financial reporting requirements
• Extreme weather conditions, natural disasters, terrorism and social unrest

Product Life cycle: different marketing strategies will need to be used at different stages
Establishment Stage
- Sales growth is slow because the business is establishing awareness of the product –
needs time to develop loyal customer base
- Profit is limited because the lack of revenue while costs are high
- Two strategies at this stage:
- Price skimming – high prices, limited promotional spending
- Price penetration – low price to establish quick entry into the market
Growth Stage
- Once a new product attracts a core group of customer who display their loyalty and
satisfaction through repeated purchases – growth and profitability will grow as sales
expand
- A strategy could lower the price to deal with increased threat of competitors in the market
and expand their distribution to allow greater access by customers
Maturity Stage (Saturation Stage)
- Sales begin to slow, consumers have considerable choice from competition
- Main strategy: product differentiation
- Through price differentiation, after-sales service, unique focus of promotion or easier to
access by consumers
Post Maturity
- Increased competition and changing consumer preferences (need for change)
- Four paths at this stage: decline, renewal, steady service and cessation
- Decline Stage – business faces increased competition and changes in the business
environment, aim at revitalising the product
- Renewal Stage – revitalise its product, alter the product’s features or packaging and
relaunch the product, new promotional campaigns – sustaining interest or taking product
to new audience
McDonald’s- in post-maturity, but constantly achieving renewal. “All Day Breakfast” – renewal.

Product life cycle – decline - Apple discontinued the old iPhone, iPod and iPad after they had
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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 42

released so many new generations of phones and tablets. This was because sales were low
and it was hard to support those devices.
Market Research: - Market research attempts to identity and outline – marketing and problems – evaluating
systematically the implementation of the marketing plan
collecting, recording - Without adequate, reliable and correct information- businesses exposed to market
and analysing embarrassments – could result in the product failing to sell
information Determining Information Needs
concerning specific - Some idea about information the business is looking for
marketing problem - Vary from customer profiles or brand awareness to attitudes towards certain new products
– means a more - Once information needs are established – determine the most appropriate research
accurate and method
responsive Collecting Data
marketing plan can - Primary Data – facts and figures from surveys and focus groups
be designed and - Secondary Data – facts and figures already collected by some other person or
therefore reduce organisation, research reports and ABS
the risk of market Analysing and Interpreting Data
failure - Attempt to analyse and interpret the data – management can gain a better understanding
of the impact of the data on the operations of the business
- Once achieved, management is able to determine most appropriate course to take
McDonald’s- uses online surveys – in 2005 37,000 surveys were completed.
Project Discovery – lead to use of less fatty oils, salt reduction and seared chicken option.

Apple had set up a website where people provided input or comments on Apple products.
Participating customers will reportedly receive up to two surveys a month.
Establishing Market These objectives need to be
Objectives: - Specific: clear and precise and relate to specific elements of the business
objectives of a - Measurable: develop controls that are effective in measuring the extent to which the goal
business provide has been achieved
framework for the - Achievable: business has the financial and human resources to achieve the goal
business to develop - Realistic: not to be based on unreasonable expectations – must be possible
a series of activities - Time: time frame the business has to achieve the goal
and operations that Goals
aim to achieve Increasing market share: increase the business’s sale and profitability, makes business
these objectives stronger and more dominant in the market place

Expand Product Mix (range of products): increase profits in the long term, same product mix
isn’t effective – changing customer tastes and preferences, demand for a particular product
may decrease
Maximising Customer Service: high levels of customer service – improved customer
satisfaction and positive reaction from customer, sound customer base – repeat purchases –
profit

Expand into New Geographical Areas: increases in sale, higher level of product and brand
awareness
McDonald’s - main goal to increase market share.
Identifying Target - Target Market selected to direct the marketing strategies to that group of customers
Markets: a group of - This enables the business to use its marketing resources more efficiently, promotion
consumers for material will be more relevant, better understanding of consumer buying behaviour, collect
whom a particular data more effectively and refine the marketing strategies
product has been Mass Market – products not aimed at a specific buyer group, appeal to all customers
developed - Differentiate their products through packaging, brand loyalty, price or the offer of customer
loyalty
Primary Target Market Segment – when the total market is subdivided into groups of people that share one or
Market: market more characteristics
segment at which - Allows businesses to design a marketing plan that meets the needs of a relatively uniform
most of the group
marketing Niche Market – a narrowly selected target market segment, this is usually neglected by large
resources are businesses because it is rarely profitable
directed McDonald’s - 21% of market in USA. Recent development in targeting children and families.

Secondary Target
Market: usually a
smaller and less

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important market
segment
Developing the marketing mix – product, price, promotion and place/distribution
Marketing
Strategies:
Implementing, Implementation
Monitoring and - Organising the activities of the business to achieve the goals
Controlling: - Successful implementation relies on:
Implementing: - Management effectively organise and lead the business
process of putting - Ensure the methods of production produce a product of that match quality expectations
the marketing - Sufficient funds are available
strategies into - Employees have skills and training necessary
operation Monitoring
Monitoring: means - Marketing department personnel as well as other employees, to gather information and
checking and report on any important changes, problems or opportunities that arise
observing the Controlling
actual progress of Developing a financial forecast – forecast the costs and revenue of each strategy – by
the marketing plan comparing these, a business is in best position to decide how to allocate its marketing
Controlling: involves resources
the comparison of Comparing Actual and Planned Results – Sales Analysis: comparing actual sales against
planned forecasted, able to examine how effective marketing strategies were, Market Share Analysis:
performance examine sales performance of a business compared to competitors, can whether marketing
against actual strategies have tempted customers away from competitors, Marketing Profitability Analysis:
performance and business breaks down the marketing activities such as advertising, transport, administration,
taking corrective order processing – comparing these costs with results achieved, manager can assess
action to make sure effectiveness of each activity
the objectives are Revising the Marketing Strategy
attained - Modifications in the marketing mix
- Adopt a revised marketing strategies when necessary, to ensure its continued success
- New product development or product deletion
- Extent of changes determined by strategies success and business environment
Marketing Strategies
Market Market Segmentation
Segmentation: - Business will implement a specific marketing mix to each target market – aim to increase
dividing the total sales, market share and profits by understanding and responding to the desires of the
market into different target customers
segments based on Demographic – age, gender, income, family size, religion
similar McDonald’s - Happy Meals contain toys for children.
characteristics Magazines have different targets for different types of people
Product/Service
Differentiation and Geographic – dividing the smaller markets based on different geographic location such as
Positioning: states, countries, suburbs – climate
products that are McDonald’s - Aloo wrap in India.
the same or similar Nicer and more luxury cars are advertised in inner cities and not in western Sydney.
are made to appear
different from Psychographic – lifestyle, personality, values and interests – why people behave the way they
and/or better than do
those of their McDonald’s - health concerns led to salads, water, fruit and grilled chicken.
competitors
Behavioural – customers relationship to the product – customer knowledge of, attitude
towards, use of, or benefits sought from the product – by determining the benefits desired
marketers can design product that directly satisfied those desires
Woolworths everyday rewards cards….to get information on how often people shop.
Product/Service Differentiation and Positioning
- By achieving differentiation the seller is able to gain more control in the market-place,
especially price
Apple (strives to do things a little different ..and charge higher prices)… face scanner,
Augmented reality

Service Differentiation – Microsoft does 24 hours online support for business and consumer
customers.

Points of Differentiation
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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 44

- Difference could be changes to the packaging or labelling – offering top quality service,
greater convenience, more features and better value for money, environmentally friendly
Customer Service
- Market research shows customers desire personalised, caring service and want high
quality and value
- Includes the premises, atmosphere, range of products
Environmental Concerns
- People are becoming more concerned with quality of life
- Business that cause pollution risk losing customer
- Business that adopt a green philosophy and an environmentally friendly operations
increase sales
Convenience
- Today’s consumers are busy, offer select products that are convenient to use e.g.
convenience foods
Social and Ethical Issues
- Growing number of consumers are becoming ethically minded and will actively purchase
or brands that believe do not exploit workers, producers of the environment
McDonald’s- “Super Size Me” led to lower positioning. McDonald’s then removed the super
size me option, advertised “Eat Smart, Be Active” 2004, “A little bit fancy” 2015 and “Un-
McDonald’s.”
Product/Service Positioning
- It is something done in the minds of the target market, how potential buyers perceive the
product, the image gives the product its position within the market
- In highly competitive markets, sales may be difficult to secure – a business creates an
image that differentiates its product/service from competitors
- Business decides on the image it wants to create and uses other elements of the
marketing mix to shape and maintain the image
- Whenever a new product is launched the marketing managers has clearly determined the
desired positioning in the product/service – achieved through the name, price, packaging,
styling, promotion and channels of distribution

Products – Goods Product Mix

and/or Services: - Most businesses have a product mix – more than one product or service – applies to non-
consists of tangible profit or profit-making businesses
and intangible parts - Three Different Dimensions: product line is a group of closely related product eg vacuum
or features – all are cleaners, breadth refers to the number of different product lines in the product mix eg a
managed and deli with cheeses, terrines, cooked meats etc., depth refers to the number of items with
promoted. A each product line eg the delicatessen will have a large number of different cheeses
product can be a
good, a service or - Many companies register their brand names legally – exclusively theirs
an idea. It is - Many brand have become household names eg Kleenex, Aspro, iPod, Google, Thermos
designed, produced and Biro
and offered to a - Businesses want consumers to be familiar with their brand as that familiarity makes them
target market. more likely to buy that brand
- A name can become associated with quality or prestige or good service
- Choosing a name can be a difficult process because of the different connotations of words
– made even harder when you are marketing internationally
Packaging: aims of packaging are identification, containment, protection, safety and
Branding: trading attractiveness - nature of packaging affects the price
name of a product - Products can be offered in different sizes – a product available in a range of sizes can
– refers to the target several segments of a market and provide opportunities for special deals
identifying symbol - Packaging is regularly evaluated and changed to meet new market demands –
carried on the item environmental awareness has led to increased refills, re-emergence of glass bottles
or particular style in instead of plastic, businesses are under increasing pressure to produce environmentally
which the name is responsible packaging (recycled, recyclable and biodegradable packaging)
written, one way in - Where the product is made can be included
which the - Packaging itself can be a part of the promotional campaign – packaging is an important
product/service can part of marketing, attention is paid to colour, size, placement of brand name and other
be identified and information, shape, texture, amount of information on the pack, graphics and illustration
distinguished from Labels
its competitors - Promote the brand name, contents (weight or volume, nutritional value, or composition or
number of parts), bar code – contains universal product code
- Information about the manufacturer – place of manufacture can be a significant issue for

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Australian consumers, prefer local products to imported products – some labels promote
being made in Australia
- Concern about the nutritional value of food – growing demand for accurate nutrition
information on labels, percentage of measures of fat content have to be explained

Apple.. simple sleek branding and packaging that speaks to people. It’s cool, it’s prestige. It’s
about passion, hopes and dreams!
Price and Pricing - If a price is set too high, it could mean lost sales unless it is of high quality, too low
Methods: refers to customers may believe a product is cheap and trashy
the amount of - Customers will only pay if they believe the benefits they receive from the product are equal
money a customer to or more than the price
is prepared to offer - Businesses try to gain some control over the differentiating their products – once this
in exchange for a happens business has more leverage over the price
product Cost: determines the total cost of production and then adds an amount for profit – extra
margin is called mark up
Market: instead of using costs to determine price – some businesses set prices according to
the level of supply and demand – whatever the market is willing to pay, when demand is high –
prices are high, demand is low price fall
Competition-Base: business can choose a price that is either below, equal to or above that of
the competitor
Price Strategies: used when determining the price of the product
- Price Skimming: occurs when a business charges the highest price possible for innovative
products
TESLA… more expensive that most EV’s but they are trying to gain back the value on R & D.
The model S costs $72700.

- Price Penetration: business charges the lowest price possible for a product or service –
strategy aims to quickly achieve a large market share for a product – ‘mass market
pricing’

Netflix… making a loss on its subscriptions while gaining a lot of new customers. They had to
take on new debt.

- Loss Leader: a special promotion (usually retail stores), business sell a product below its
cost price to attract customers to the store – while the business makes a loss on this
product, extra customers will buy other product as well
McDonald’s- loss leader of 50c cones and “loose change menu.” 3 for $3 (2017)

- Price Lining (price points): used mainly by retailers – businesses chooses a limited number
of key prices or price points for selected product lines
Price and Quality Interaction: ‘you get what you pay for’
- Products of superior quality are sold at higher prices – usually due to higher
manufacturing cost involved in producing them
- Helps determine the image customers have products or brands
- Low price – the product is viewed as cheap
- High price – product develops an aura of quality and status

Quality: Google = perceived as lower brand - cheaper. Apple always commands higher prices
and margins! The iPhone 8 cost around roughly $1200, whereas the Samsung equivalent
costed $800- 900.

Pricing strategy is called prestige or premium pricing.

- Designed to encourage status-conscious consumers to buy the product
- Based on the tendency for consumers to assume that expensive products are of superior
quality and distinction
- If a business using this strategy lowered their prices dramatically it would damage their
reputation because it is inconsistent with the perceived images of such products
Pricing Methods:
Qantas uses a combination of:
• Cost plus margin: Qantas determines the cost of production and then adds a margin for
profit.
• Market: most fares at Qantas are determined by the market, where demand is matched with
supply

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 46

• Competition based: monitoring what other airlines such as Virgin Blue are charging.
Pricing Strategies:
• Price Penetration: Qantas uses this strategy (lowest possible price) for Jetstar and Jetstar
International.
• Full Fares: for those wanting flexibility (important for business travellers) as full fares can be
refunded and changed.
• Promotional Fares: these are not advertised as a discount on the full fare i.e. 20% off, but
are quoted as a price. They are usually offered in the economy cabin at times of subdued
demand or to match competitors. Other promotional fares can be conditional such as:
- Departure time limitations: defines the period of departure which allows Qantas to offer low
cost fares outside peak demand periods.
- Packages are sold as part of an inclusive holiday, which includes hotels, meals and transfers.
Loss Leading: Qantas used this pricing strategy when it first launched Jetstar in May 2004 and
Jetstar International in November 2006 by introducing ridiculously low fares to gain initial
market share. Recently, Qantas offered fares on its Sydney-Melbourne route as low as $19 to
coincide with Tigers Airways entry.
Promotion: Elements of the Promotion Mix
informing the Personal Selling
market about a - Uses very interpersonal communication techniques usually between a wholesaler and
product, service, retailer
company or brand – Advantages
used to - Opportunity to give immediate feedback to the customer – questions and customers
communicated how answered straight away
a product will help - Messages can be tailored to suit individual and circumstances
satisfy the needs of - Information can be expanded or reduced on the spot
the consumer - Sale can be made immediately
- Real-life demonstration is more convincing
Disadvantages
- Very time consuming
- Some customers are reluctant to listen to ‘sales pitches’
- Effectiveness is very dependent on the skills of salespeople
Advertising
- Most notable and easily identified from of promotion
- Part of everyday life – TV, radio, newspapers or magazines
- Paid, non-personal communication about products and services
- Costs a lot of money – especially TV ads
- Primarily designed to persuade but can also inform, remind, instruct and entertain – key
message for ad should be stated clearly in one sentence
Two kinds of advertising –
- Product Advertisements: attempt to persuade the consumer to purchase product or
service – most common
- Corporate Advertising: corporation or organisation promotes itself and attempts to
enhance its public image – not aimed at potential consumers but also shareholders,
investors, employees and the general public – referred to as public relations
McDonald’s - TV ad campaign by Michael Caton which cost $10 mill, but brought sales of $2
mil a week. McDonald’s - My McDonald’s site giving exclusive offers, newsletters, a “My Ideas”
section, free wifi and an online offer wallet.

Relationship Marketing
- Customer wants more individualised treatment
- Looking to develop long-term, cost-effective and strong relationships with individual
customers
- Ultimate aim to create customer loyalty and meeting the needs of the customers on an
individual basis - creating reasons for repeat purchases
- Successful strategies include Coles’ Fly Buys Rewards and Woolworths Everyday Rewards
scheme
- Can provide the business with a competitive advantage

Sales Promotion
- may decide to offer a direct inducement to customers to encourage sales
- aims to – entice new customers, encourage trial purchase of a new product, increase
sales to existing customers and repeat purchases
- Sales promotion techniques used primarily to increase the effectiveness of other
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promotion activities
- Examples: Coupons – offer discounts of a stated amount on particular items at the time of
purchase best for new and improved products, Premiums – gift offered in return for using
the product, Refunds – part of the purchase price for customer that send in a proof of
purchase, Samples – free item or container of a product and Point-of-Purchase Displays –
special signs, displays and racks are supplied and installed by the manufacturer in retail
outlets (usually located at the end of aisles to gain consumer attention and more efficient
use of floor space)
McDonald’s - annual Monopoly promotion.

Publicity and Public Relations

- Involves communicating an organisation’s image to the public developing and fostering
positive relations between a business and consumers
- Most common public relations strategy is attracting free media coverage – term covers
print and non-print media
- If an organisation doesn’t feel a personal appearance is necessary they may release a
statement to the press – press release or media release
- Sponsorship – the purchase of the right to associate a sponsor’s name, products or
services with the sponsored organisation’s service, product or activity in return for the
negotiated benefits – major way of raising the profile of an organisation by associating
with individuals or events associated with success
McDonald’s - PR chef Neal Fraser made entire meal out of McDonald’s’ ingredients.
Sponsorship of Olympics and FIFA world cup. Publicity articles led to comments like “It goes to
show you that McDonald’s is real food.”
Communication Process
- Exchange of meaningful information, marketers must be aware of the communication
process – marketing methods are effective as possible
- Process involves message source (source of the communication, the people intending to
convey information) and a message receiver (intended target of a message source’s
communication efforts).
- Message needs to be decoded to give meaning to it, receiver will send feedback to the
source by repeat purchases or ignoring the message
- Communication medium or channel is decided- TV commercial, billboard, text message
- ‘Noise’ refers to any distractions for sender or receiver – other advertisements,
inappropriate images, faulty printing
Opinion Leaders
- Effective message senders – people or organisations with influence who filter ideas and
information and use to spread their ideas to the wider community
- People or organisations that people respect the opinions of in a particular industry, issue,
interest and ideology

Examples: Bill Gates, Rupert Murdoch, Michael Clarke (cricket equipment)

Apple gives early access to tech leaders and people with big followings (where they make
videos on the phone). They also advertise on train stations, TV and online. Youtubers make
videos as they get early releases of the latest phones. They also pay for spots in films and TV
shows (most movies use Apple products).
Word of Mouth
- Marketing technique relies on verbal recommendation of a product or service
- Person-to-person communication but marketers are relying on methods such as phone
convos, IMs, emails and blog posts
- Highly effective method of reaching target market (TM) directly
- Relies on communicating with TM, omitting expensive mass media methods of marketing
Place and - Involves efficient distribution the product or service
Distribution: point - Consumers will be discouraged if they are unable to obtain products they want
where the sale immediately
exchanged between - Need to develop a system or process within the business to distribute the product or
a business and the service
consumer occurs - Examples: a retail shop with displays and salespeople, an on-the-road, delivery type of
operation and via the internet
Distribution Channels and Intermediaries
- Products moved to consumers using a series of organisations or individuals in a chain or
distribution channels
- Channels can be direct, producer selling direct to consumers, and indirect, producers use

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one or more intermediaries to reach consumer

- Producers use intermediaries to streamline the product the distribution process
- Intermediaries: transport companies, wholesalers, retailers and specialists such as
auctioneers
- Most common channels are:
Direct: (manufacturer – Consumer)
Indirect: (manufacturer – retailer – consumer)
(manufacturer – wholesaler – retailer – consumer)
- Businesses need to consider cost involved, convenience for the customer,
appropriateness for the product, number of items involved, distance between
manufacturer and consumer and storage facilities at the manufacturing plant
Channel Choice – Intensive, Selective, Exclusive
link to position – mass market, target segment and niche market)
- Most appropriate distribution channel needs to be chosen
- Business needs to know its target market as well as the nature of the product
- Decide upon the size of the market – market coverage
Intensive Distribution
- Available at as many retail outlets as possible – milk, newspaper, Coca Cola
- Low priced and low-margin products that require fast turnover – need to be readily
available – consumer will buy the most convenient time and place for them
Advantages: increased sales, wider consumer recognition and promote impulse buying
Selective Distribution
- Involves using some but not all retail outlets to distribute products
- Consumers typically seek out best value for money – Wii Consoles or Nike Shoes
- Used by producers are require a reputable retailer to carry a full product line and provide
after-sales service
- Manufacturer would also not necessarily sell any more products if it were more widely
distributed
Exclusive Distribution
- Number of retailers of a particular product is heavily restricted
- Used to create product loyalty, greater sales support, more control over the retail market
and better merchandising and inventory control
- Promotes and image of status and prestige
- Examples: Gucci handbags, Rolex watches and Tiffany and Co. Jewellery
McDonald’s- producer – retailer – customer channel. Selective distribution.
Apple sells directly to consumers and also goes through retailers (E.g. Jb Hifi)
Place/Distribution

Distribution to end customers is achieved by Qantas in two ways, direct and indirect:
Direct (sale of products direct to the consumer)
• Direct sales via its own retail outlets. Qantas has a network of wholly owned Qantas Travel
Centres called Qantas Holidays (the largest travel wholesaler in Australia). Qantas has also
bought into Viva, Jetset and Jetabout which reduces the likelihood of the owner entity selling
competitor tickets. This represents vertical integration of the distribution chain;
• Telephone sales centres;
• Airport ticket sales; and
• The Internet

Indirect (using intermediaries)

Through travel agents: Qantas has a strong relationship with a number of other retail agency
chains including American Express, Community Travel, Flight Centre

Physical Distribution Issues

- Efficient distribution involves managing the physical movement or transportation of
products between manufacturers, wholesalers, retailers and the consumer
- Logistics of transportation, warehousing and inventory
-
Transportation
- Different types of transport required for different types of products – fresh seafood moved
from boats to markets and retailers as quickly as possible
- Products that are less perishable – canned goods or footballs – require less careful
handling
- Producers need transport that is safe, reliable and cost effective

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Warehousing
- Receiving, storing and dispatching products
- Effective warehousing needs to be well designed for ease of access and movement and
have excellent data control – to know what’s coming, how long it will take, how long it will
be stored and when and where it needs to go
Inventory
- Has to be carefully managed
- Businesses need to balance the cost of storage with keeping sufficient stock levels to
meet consumer demand
People, Processes People
and Physical - Appropriately recruited, qualified and trained employees
Evidence: service - Refers to the quality of interaction between the customer and those within the business
sector expanded who will deliver the service
and 4P’s don’t - Consumer perceptions and judgements based on how employees treat them
apply to intangible - ‘Human Face’ of the business – how the staff speak to customers, deal with enquiries and
products – tourism handle complaints – all part of the marketing experience critical importance
and hospitality - All businesses develop a culture of customer focus and put into practice – customer’s
experience must match reality

People
The quality of Qantas' services depends on the ability of its human resources. Because most
customers have direct contact with Qantas employees, especially on the ground (through
ticketing, check-in and baggage handling), the impression they give has a big impact on how
Qantas is perceived. Qantas staff (over 35000) must have appropriate personal attributes and
training for their jobs. Qantas spends more than $275 million a year on staff training to ensure
a very positive interaction between its customers.
Processes
- Efficient delivery – well-planned and well-organised processes
- Employees provide a service, rely on delivery – a set of processes to perform their task
- Processes refers to the flow of activities that a business will follow in its delivery of a
service
- Without tangible product, processes must be highly efficient to achieve customer
satisfaction
- The delivery system that allows this to happen is part of the process element of marketing
- Any business that has an inefficient processes will lose customers and damage its
reputation
Physical Evidence
- Refers to the environment in which the service will delivered
- Also includes materials needed to carry out the service – signage, brochures, calling cards,
business logo and website
- Unlike tangible goods, difficulty for business’s marketing services to provide customers
with ‘try before you buy’ sample unless a free trial is offered
- Customers buy services on trust
- Business should provide high-quality physical evidence to create an image of value and
excellence
E-Marketing: the - Serves as an area of personalised marketing, sale growth and brand awareness
growth of - Broad form of marketing also involves the use of emails to directly liaise with and
technology has communicate for customers
impacted business - Online operations reach a global audience
operations through - Internet marketing involves the use of a multifaceted approach to marketing: the website
the businesses must be creative to attract interest, while fulfilling technical aspects, ensuring the site is
ability to interact user friendly and suitable for the intended audience
with operations - E-Marketing is the fastest growing sales medium in Australia – caters to a diverse group of
customers, range from time-poor consumers who are unable to access the traditional
trading hours or retail stores or who wish to avoid queues and parking problems
- Stores have also sought to establish secure payment methods as a means of reassuring
customers that their financial details are safe and secure
- E-Marketing Technologies: web pages, podcasts, SMS
- Social Media Advertising (SMA): form of online advertising using social media platforms
such as Facebook, YouTube and Twitter to deliver targeted commercial messages to
potential customers
Many companies now sell through a website and don’t have many stores globally. E.g. THE
ICONIC
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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 50

Apple sells directly through their website and does orders through it.
Global Marketing: Global Branding
operating beyond - Worldwide use name of name and logo to identify product
domestic borders - Increasing as it is cost effective – one advertisement in a number of locations, provides
giving an uniform worldwide image and successful brand name linked to new products being
opportunity to introduced
increase sales, - Global recognition
further brand McDonald’s- 54% of people recognise the golden arches over the Christian cross.
awareness and McDonald’s-- 2.5 mill Big Macs sold daily.
establish markets in McDonald’s-- selling of alcohol in Europe.
new countries
- Influenced by Standardisation
culture, income - Assure the way the product is used and the needs it satisfies are universal – the same in
and standard of each country
living, - Marketing mix same in each country – iPhone, electrical equipment, mobile phone and
businesses will soft drinks
modify their Customisation
product or - Modifies marketing mix or develops new one they are adopting – assures the product is
promotional used and the needs it satisfies are different between countries
strategy - Marketing plan customised according to economic, political and sociocultural factors of
target country
- Most common: Standardisation because of the increasing scale of globalisation
Global Pricing
- Coordinating pricing policies across different countries
- Generates revenue and determines profit points – accurate pricing decisions must be
made if overseas expansion is successful
Customised Pricing
- Different countries have different prices for same product
- Price for overseas market, business use cost-plus, cover cost of exportation
- Costs: transportation, taxes and warehousing
McDonald’s-- Big Macs cost US$1 in Sri Lanka and US$6 in Switzerland.
Market Customised Pricing
- More flexibility than customised pricing
- Prices according to market conditions
- Avoid domestic competition-adopt this strategy that allows market to vary price depending
on level of demand and competition
- Competitive market, price decreases
- If the business has a monopoly the price is higher
Standard Worldwide Pricing
- Charging customers the same price, worldwide
- Succeed if foreign marketing costs remain low enough not to affect overall costs
- Two major risks: domestic business may undercut the standardised, changes in the
exchange in the exchange rate, negatively impact on the exported price
Competitive Positioning
- Differentiate – strive to develop product leadership, positive customer relationship and
operational excellence
- Develop and maintain competitive position – deep understanding of dynamic
environments in which they operate and form strategies according to evolving conditions.
McDonald’s has the same big M globally, prices are pretty similar (they can also be used to
predict exchange rates to an extent – Big Mac index), but products are customised for local
markets. There’s rice in Asia and local Mexican food in Mexico. McDonald’s also has an
efficient global network of local suppliers (collaboration) , which makes it less costly to provide
services and this is passed onto customers.

McDonald’s also adjust the pronunciation and script to make it sound more pleasing for
languages such as Japanese or German.

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 51

Human Resource Management

- The hiring of people
- Managing talent
- Laws relating to employment of staff

Role of Human Resource Management

Strategic role of human HR management focuses on decisions and plans for achieving long-term goals. It is done
resource management- through achieving benchmarks for the indicators:
– corporate culture
– changes in staff turnover
– absenteeism
– accidents
– levels of disputation
– worker satisfaction

- Employee as an asset rather than cost and encourages open communication and
goal orientation – accepts the legitimate differences exist in workplaces – aims to
reduce conflict through procedures and relationships
- Examine ways to improve competitiveness and profitability
- Use of HR strategies to retain, reward and motivate effective and skilled employees
- Biz with effective practices manage change more effectively and enhances their
ability to gain a sustainable competitive advantage
Major Strategic Challenges for HR Management
- Developing and retaining talented staff
- Improving leadership development
- Managing the ageing workforce
- Succession planning
Worldwide, McDonald's directly employs approximately 210,000 employees, whilst a
further 1.7 million people work for franchises. In all, there are more than 1.9 million
people who work for McDonald's. Of these, 103,000 are in Australia. These employees
are the "face" of the business to the 69 million customers who go to a McDonald's
restaurant each day around the world. This makes the role of human resources critical
in the success of the business. Given that McDonald's operates in more than 120
countries and that approximately 80% of its restaurants worldwide are franchises a
coherent company-wide approach is necessary to the important human resource
function.
Interdependence with Each part of the business relies on a constant flow of information between the other key
other key business business functions to operate effectively.
functions - Marketing identifies the nature of goods customers desire and encourage
purchased.
- Operations supplies these products that has the relevant features and distribute
the product to the market
- Finance managers create budgets and makes funds available. Operations must
use these funds as well as ensure costs are minimised to maximise profits
- Human resources ensure employees with relevant skills are available, as well as
manage and reward these employees. Operations use these employees to allow
the work to be done.
HR and Operations
- Most employment in any business
- Planning staffing needs, acquiring employees, training and developing them,
supervision and maintenance and conflict resolution – recruit staff with relevant
skills and experience necessary to produce the product
- HR monitors performance of employees – training and development initiatives may
also be implemented
HR and Marketing
- Hire and training employees for marketing (quality training and development)
- Staff motivated and skilled to develop products within the business to cater to the
needs and wants of potential customers
- Through marketing process, determine skills required for staff
- Staff are public face of the business

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HR and Finance
- Info finance gathers on earnings, productivity and customer satisfaction provides
insight into staffing and development needs of a business
- Recruiting skilled and highly motivated staff benefits profitability of business
Budgets allocate funds towards training and development, workplace education issues
such as affirmative action and occupational health and safety and remuneration
Outsourcing - Obtain superior service, better functional quality and lower cost service
- Human resource - Areas being outsourced: property and facilities management, financial processes
functions such as payroll, administration support services, internal auditing, call centres,
- Using contractors - maintenance and, most commonly, human resource function
(domestic, global) HR Functions Commonly HR Areas commonly outsourced for review or
Outsourced development
Recruitment, Induction, Human resource information systems (HRIS),
Leadership training, change management, training needs
Mediation, evaluation, compensation (wages and salaries)
Outplacement, Payroll systems, performance management systems,
succession planning, high performance
coaching, employee surveys, written policies
and programs, training and development,
benchmarking

Using Contractors
- Contractor – an external provider of services to businesses, individual or
business
- Used to create cost savings, access greater expertise and capabilities to improve
competitiveness
- Outsourcing is used for tasks that are repetitive and easily measured – easy to
determine cost savings and productivity gains
- Risks: cost overruns (cost increase), loss of quality, difficulty coordinating
activities and difficulty monitoring quality and performance in outsourced
activities
- Contractor agreement – business should set clear and legally binding terms, and
time frames, and conditions in a contractor agreement to avoid conflict and
litigation
Features of Outsourcing
- Labour Hire/ Employment Agency – workers are employees provided to the host
companies, superannuation, insurance/ worker’s compensation
- Labour Hire/Employment Agencies/Dependent Contractors – don’t control their
working procedures and prevented from subcontracting (multiple contracts)
- Independent Contractors – operate own business, set terms and conditions,
contract themselves out, make their own worker’s compensation and
superannuation
- Outsourced Suppliers – supply goods/services, control work procedures,
manage superannuation
Domestic vs. Global Sourcing
Domestic – avoids need to employee additional ‘in-house’ staff, avoid overhead
expenses involved, common, focus on core business functions, attractive to SME’s who
lack capacity to undertake internal auditing, compliance updates, research
Global
Potential Advantages Potential Disadvantages
Expand capacity/flexibility, improve Less integrated organisation, quality
quality, save costs, access new may fall, consultants may not
networks, conserve capital, allows understand culture, costs may increase,
business to focus resources on hidden costs, morale and motivation
main activities may be damaged, less face-to-face client
contact, loss of security and
confidentiality of information

Outsourcing is the arrangement where one company provides services to another

company. This can be through outsourced suppliers or independent contractors.
A contractor is an external provider of services to a business. It may be an individual or a
business.

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 HSC BUSINESS STUDIES – NOTES WITH CASE STUDIES 53

There are two forms subcontracting (using contractors) –these are domestic (within
Australia) and global (using offshore contractors or outsourced partners)
Factors that influence the decision to outsource some its functions include:
- Types of positions and whether they are difficult to fill
- Training needs
- Possible Information leaks
- Loss of control
- Consumer demand
- Quality of inputs required
- Flexibility and timeliness of supply
- Cost of supplier
- Obtain superior service, better functional quality and lower cost service
Areas being outsourced: property and facilities management, financial processes such as
payroll, administration support services, internal auditing, call centres, maintenance and,
most commonly, human resource function
HR Functions Commonly Outsourced
Recruitment, Induction, Leadership training, Mediation, Outplacement, Payroll
HR Areas commonly outsourced for review or development
Human resource information systems (HRIS), change management, training needs
evaluation, compensation (wages and salaries) systems, performance management
systems, succession planning, high performance coaching, employee surveys, written
policies and programs, training and development, benchmarking

Many companies now hire or use external services to conduct hiring, payroll for them.
One service that they use is SAGE. Many companies now hire or use external services to
conduct hiring, payroll for them. One service that they use is SAGE.

Apple outsources the production of iPhones (and most of its other products) to
manufacturing contractors, mostly located in China. Foxconn is one of the largest
producers of Apple products, including the iPhone.

McDonald's Australia engages AON Hewitt to conduct annual staff surveys. Keeping track
of emerging issues within the workforce via reliable data is essential in effective human
resource management. Although McDonald's Australia is a Registered Training
Organisation (RTO) in its own right, it also regularly outsources to third parties to deliver
training to staff. An example was online training through the company's internal computer
system ("Metime"), arranged and implemented by Professional Public Relations Australia,
a company with extensive experience in such projects. The training was specifically related
to a McDonald's "Monopoly" promotion.

An advantage of outsourcing is bringing in specialist expertise to the organisation. It can

also be cost effective and easier to use on a temporary basis. It also has the added
advantage of being more objective. For example, engaging AON Hewitt to survey
employees may result in more open, honest feedback as employees would not be
required to give negative feedback to store managers. Disadvantages include the risk of
losing control of certain functions, as well as potential issues that may arise from the
release of sensitive information to external parties.
Influences on Human Resource Management
Stakeholders Employer
Employers, employees, - Person/business seeks labour under a contract of employment
employer associations, - Definition can be expanded to include governments, public authorities and
unions, government companies
organisations, society Objectives: increased profitability, productivity, efficiency and competitiveness
Employee
- Person employed full-time, part-time or casual basis – relationships with employer
governed by contract (general or specific duties)
Objectives: better pay and working conditions, flexible working conditions and fair and
ethical treatment
Employer Associations
- Support groups – consists of employers in similar industries
- Purpose is to represent the industrial or commercial interests of member

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organisations and businesses

- registered under the same state and federal acts as industrial organisations or
unions
- Examples: Australian Chamber of Commerce and Industry (ACCI), Australian Industry
Group and Australian Retailers Association (ARA)
Objectives: increase profit, flexibility, minimise costs and be competitive
Unions
- Represent groups of employees – within particular occupational groups
- Aus. relatively high union membership – last 20 years show through economic
factors, structural changes and the growth of new, unorganised industry sectors has
led to a decline in union membership
- Last two years – reverse of this trend
Objectives: better wages, working conditions, job security and participation in decisions
Government
- Fair Work Australia (independent body) is the national workplace tribunal – functions
relating to minimum wages and employment conditions, industrial action, dispute
resolution, enterprise bargaining, termination of employment and other workplace
matters
- States have their own industrial relations process – NSW, Industrial Relations
Commission (NSW) deals with state issues and enforces the Industrial Relations Act
1996
- Provide a legislative background for industrial relations – recent developments have
put more responsibility on the parties to solve problems rather than being
adjudicators
Society
- No direct influence – workplace practices are reflective of behaviours that are upheld
in society
- Issues such as perceived discrimination, harassment and unfair working conditions
increasingly publicised
Apple Retail Workers Union (ARWU) was launched in 2011 to represent the interests of
Apple Retail employees.

McDonald’s
● McDonald's is a significant employer in Australia, accounting for around 8% of all
restaurant and cafe workers in total.
● Unions have traditionally had a minor impact on the way McDonald's conducts
human resource management worldwide. However, over 8,000 McDonald's
employees in Australia now belong to the Shop, Distributive & Allied
Employees' Association (SDA). Although this makes up only around 8% of the
national workforce, the SDA was the party that negotiated the enterprise
agreement for all McDonald's workers in Australia.
● The Fair Work Ombudsman (Fair Work) - This statutory body ensures that
employees in Australia are treated according to the law. In the case of
McDonald's Australia, Fair Work checked and approved the enterprise
agreement between the company and its employees (as represented by the
SDA union).
● Local Governments - These bodies are responsible for zoning laws and rulings
about where McDonald's can be situated in Australia and hours of operation.
● State Governments - Around Australia, they collect payroll tax and administer
WHS legislation through such agencies as Safe Work NSW.23 Safe Work NSW
influences human resource management by ensuring that all tasks
McDonald's employees carry out are done it a safe manner
● Federal Government – As well as running the ATO, ASIC and Fair Work, the
Federal Government implements policies that impact on human resource
management. For example, the progressive reduction in the corporate tax
(eventually to 27.5% by 2023/24) is aimed at creating more jobs in the
economy
legal – the current legal Current Legal Framework
framework – the - Fair Work Act 2009 → ensure balanced framework for cooperative and productive
employment contract – workplace relations – promote national economic prosperity and social inclusions for
common law (rights and all Australians
obligations of Provides workplace laws that: are fair, flexible for business, promote productivity and
employers and economic growth for our future economic prosperity and take into account our

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employees), minimum international labour obligations

employment standards, - Acts also designed to: help employees balance work and life commitments (flexible
minimum wage rates, working arrangements), enable fairness at work to prevent discrimination, achieve
awards, enterprise productivity and fairness by emphasising workplace level collective bargaining
agreements, other between the employer and employees and their representatives
employment contracts - Fair Work Act provides a safety net of enforceable and conditions through the
– work health and National Employment Standards (NES)
safety and workers - NSW has the Industrial Relations Act 1996 – deals with work health and safety,
compensation – worker’s compensation and processes for resolving disputes
antidiscrimination and The Employment Contract
equal employment - Legally binding, formal agreement between employer/employee
opportunity - Written contract gives more protection than verbal contracts – disputes often occur
over contracts if working arrangements are not clear (one person’s word against
another) – written contract encourages clarifications of job duties and
responsibilities of a job
Features of Contract: hours, location, promotion policy/procedures, discipline
policy/procedures, bonuses, overtime, superannuation, benefits, salary/wages, leave,
confidential information, duties and supervision
Common Law
- Developed by courts and tribunals (not made by parliament) – decisions are made
on facts of a case and guided by precedent
- Under common law both parties (employees and employers) have obligations in any
employment relationship
Employer Obligations - providing work, payment of income and expenses, meeting
requirements of industrial relations legislation (providing equity policies free from
discrimination as required by legislation of state and federal government and ensuring
workers are protected from unfair dismissal – only have the right to dismiss employees
that neglect their duties, are guilty of theft/dishonesty, exhibit wilful or serious
misconduct, failure to meet the conditions of the employment contract and fail to
perform satisfactorily over time) and duty of care (Employers bound by federal/state
Occupational/Workplace Health and Safety Acts to provide a safe system of work,
maintain premise that does not expose employee to risk of injury and provide resources,
information, training and supervision)
Employer Rights – employees will work with care and responsibility, being notified
according to agreement/award of an employee’s intention to take their leave
entitlements, receiving formal advice of a worker’s intention to leave the business
Employee Obligations – carry out duties that are beneficial to business, maintain
confidentiality, account for all money coming into the business, take reasonable care and
act safely in the workplace, follow written and verbal procedures/policies, be honest, fair
and work with integrity in all dealings, obey lawful commands, complete tax forms
Employee Rights – being paid for work (including overtime if applicable), receiving
minimum set out in the award or enterprise agreement, having access to paid and
unpaid leave entitlements

Minimum Employment Standards – Ten National Employment Standards (NES)

- Must be provided by employers – especially for the most vulnerable and low-paid
employees in the workforce (basis from which modern awards and enterprise
agreement are constructed)

Minimum Wage Rates

- Base rate of pay for number of ordinary hours that they have worked – determined
by modern award, enterprise agreement or national minimum wage
- Minimum Wage Panel of the Fair Work Commission reviews minimum wage each
year – main objective is to establish a safety net of fair minimum wages
- Alterations of min wage can only occur criteria (performance + competitiveness of
economy, promoting social inclusion through increased workforce participation,
relative living standards and needs of low income earners)
Awards
- Legal document that outlines minimum wages and working conditions for all
employees working in a particular industry
- Remain in force until varied or cancelled by agreement among employers,
employees, unions and Fair Work Australia
- Established through negotiations between dominant employers, employer
associations and trade unions (Fair Work Australia may assist parties in reaching
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common agreement)
- Under Fair Work Act, parties to a wage agreement may apply to Fair Work Australia to
have award changed, allowing award to be altered to suit particular individual or
business (wage and working conditions cannot go below original award
- Award breaches may be reported by employees to Fair Work Australia through union
or Fair Work Ombudsman
- Negotiations in contents of awards led to strikes by unhappy employees
Enterprise Agreements
- Enterprise agreements can be tailored to meet the needs of particular enterprises –
made on an enterprise level between employers and employees about terms and
conditions of employment
Types of Enterprise Agreements
- Single Enterprise Agreements: single employer and group of employees
- Multi-Enterprise Agreements: made between two or more employers and a group of
employees – may occur if they share common funding, operate collaboratively and
have a common regulatory system (e.g. group of hospitals)
- Greenfields Agreements: single + multi enterprise agreements made for a genuine
new enterprise that are made by employer(s) that are made before any employees
are employed (made with 1 or more relevant unions)
Key Features: may cover rates of pay, penalty rates and overtime, allowances, hours of
work, personal and annual leave, any matters related to the relationship between the
employer and employees and how the agreement will operate
- Fair Work Australia assists in the making of agreement, deals with disputes arising
under the terms of agreement and assesses and approves agreements
Other Employment
Casual: employed by a business for short periods of time (minimum of between 1 – 3
shifts), regularity is determined by employer’s demands, employer is not obliged to
provide regular, ongoing work, are not entitled to holiday/sick leave → paid 1.5 times the
wage paid to a full-time, permanent employee
Part-Time: work fixed set of hours/week but usually less than those of a full time
employer, optional additional hours, entitled to benefits of full-time staff (e.g. sick and
annual leave), provided on pro rata basis (proportionate of days work with full time
worker), entitlements are based on this proportion
Fixed-Term: use of labour for specific amount of time, both parties are in agreement of
time period and alterations must be done with consent, employer seeks to terminate the
contract against wishes of employee known as breach of contract, employee has right to
pursue court action to recover lost income earnings, employers can seek legal
compensation if contractor did not perform task that they were paid to do
Permanent: provided with continuing employment, work between 35 and 40 hours per
week (may be requested to work longer), may be paid overtime allowances (outlined in
wage agreement), entitled to four weeks’ holidays per year and receive 1.1 weeks’ long-
service leave for each year of service to the business
Workplace Health and Safety (WHS)
- Growing community + worker awareness of safety and environmental issues have
prompted both federal and state government to improve WHS → concern about the
high levels of injury, accidents and disease in the workplace introduced the National
Occupational Health and Safety Commission Act 1985
- Safe Work Australia – established to conduct research and develop national
standards, codes of practice and common approaches to WHS legislation
- Collaboration between state government and Safe Work Australia intends to form a
national system of occupational health and safety and worker’s compensation,
improve productivity by reducing compliance costs and improve quality of work
health and safety conditions for all Australians
- NSW, under Work Health and Safety (WHS) Act 2011: employers can be fined up to
$550 000 for breaches of the act, employers must provide a safe system of work, all
employers must be protected by workers compensation, health and committees
must be formed in workplaces of over 20 employees, WorkCover inspectors may
enter the workplace and undertake inspections and employees must abide by all
safety guidelines and face penalties if they don’t
- Best Practice – HR undertakes regular safety audits, benchmarks their performance
and implements comprehensive safety program – policy statements, safety signs
and reminders are visible + regular, ongoing staff training (build awareness safety
rules + prepare for emergencies)
Worker’s Compensation
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- Encourage safe practices, provide financial assistance for worker injuries in the
workplace and assist workers to return to work
- Administered by WorkCover New South Wales under two Acts of state parliament: the
Workers Compensation Act 1987 (NSW) and the Workplace Injury Management and
Workers Compensation Act 1998 (NSW)
- Aims of worker’s compensation provisions are to: prevent accidents, compensate
injured employees and rehabilitate workers in order to speed up recovery
Anti-Discrimination
- Occurs when a policy or practice disadvantages a person or a group because of
personal characteristics that irrelevant to the performance of the work
- Includes harassment (offending behaviour or work intimidation) and vilification (a
public act which is discriminatory and incites hatred)
- Anti-discrimination legislation→ protect employees from direct and indirect
discrimination in HR process including promotion and opportunities to access other
employment benefits or practices
- Main Legislation: Human Rights and Equal Opportunity Commission Act 1986
(Cwlth), Affirmative Action (Equal Employment Opportunity for Women) Act 1986
(Cwlth), Sex Discrimination Act 1984 (Cwlth) and the Anti-Discrimination Act 1977
(NSW)
- Agencies involved: Australian Human Rights Commission, Workplace Gender
Equality Agency and Anti-discrimination Board (NSW)
- Under discrimination laws it is illegal to take adverse action in employment on the
grounds of a person’s: race, sex, sexual preference, colour, physical/mentality
disability, religious faith or political opinion, social origin or national extraction,
marital status, care carer responsibilities and pregnancy
- Strategies to eliminate discrimination: having code of conduct, all policies/
procedures are accessible to employees, training managers/staff in diversity issues,
regularly evaluating policies, workplace culture and action taken to resolve
complaints
Equal Employment Opportunity (EEO)
- Equitable policies and practices in recruitment, selection, training and promotion
- EEO ensures the best for the job is chosen, the business gains the person with skills
and abilities most appropriate for the jobs – more positive work environment is
promoted
- Affirmative action – measures taken to eliminate direct and indirect discrimination
and for implementing positive steps to overcome the current and historically causes
of lack of equal opportunity for women
- Strategies to improve equality: affirmative action program/inform staff, developing
code of practice; gather, monitor and evaluate stats an employment, keeping all
staff informed of vacancies and opportunities within business and benchmarking to
analyse the effectiveness of the business’s strategies to improve EEO
Workplace Gender Equality Act 2012 – aims to promote and improve gender equality
and outcomes for women and men in the workplace – Workplaces: provide equal pay
and conditions for men and women for work of equal value, remove obstacles for
women in the workplace, access to all jobs and industries including leadership for men
and women and eliminate discrimination on basis of gender (e.g. personal
responsibilities including family and caring)

McDonalds:
The Employment Contract
Australia has become increasingly reliant on statute law (legislation) to govern the
employer / employee relationship, in particular the Fair Work Act 2009. This legislation
created a national approach to workplace awards and agreements. Legislation, however,
does not remove the common law obligations of both employers and employees. An
agreement between an employee and employer is first and foremost a contract - a legally
binding agreement with rights and responsibilities. It gives injured parties avenues to sue
for negligence.

As an example, in 2013 it was reported that a McDonald's Queensland employee was

allegedly injured by a falling stack of boxes (loaded with fries). The court awarded
damages of AU$327,000 which included a claim for the lost earnings the employee
would suffer as a result of the accident. Currently, all Australian employees of
McDonald's, whether at a company or a franchised store, come under the McDonald's
Australia Enterprise Agreement 2013. This enterprise agreement was negotiated
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between McDonald's Australia and the SDA, which represented the workers. 97% of
McDonald's employees voted to accept the enterprise agreement. The agreement is due
to expire in 2017 and is one of the largest enterprise agreements in Australian labour
history.
With such a large workforce, the vast majority of whom perform very similar tasks, an
enterprise agreement can be a quicker, easier and fairer method of industrial relations
negotiation than the alternative individual contracts. Individual contracts can often be
time-consuming to negotiate, difficult to administer and may potentially leave
McDonald's exposed to claims of using its size and strength against its workforce -
predominantly young people in their first job. A report in the Sydney Morning Herald
claims that some McDonald's employees are worse off under the current enterprise
agreement
Work Health and Safety and Workers Compensation
The Standards of Business Conduct - The Promise of the Golden Arches states: "We are
committed to providing a safe and healthful working environment for our employees. We
require all employees to abide by safety rules and practices and to take the necessary
precautions to protect themselves and their fellow employees. For everyone's safety,
employees must immediately report accidents and unsafe practices or conditions to their
immediate supervisors.
Anti-discrimination and Equal Employment Opportunity
McDonald's reports that more than 70% of its United States workforce is either female or
from a minority group. In Australia in 2012 (latest figures available), 56% of the senior
leadership team was female and 44% of executive management positions were held by
women.

NAB: Case Study

NAB has developed a self-service flexible working intranet site where employees can
manage their formal or informal flexible working arrangements directly with their
manager.

7/11 and many places got fined in 2017 for not paying enough (legal) wages to workers.
This was owed under the General Retail Award 2010.

economic - Economy moves in cycles, operating at levels ranging between booms and busts and
the demand

Economic Cycle Effect on Human Resources

Boom – consumer demand is - Increase in demand for labour
high, businesses invest and the - Business encouraged to offer extra
level of economic growth is remuneration to attract recruits
increasing - Demand on training services as
employers may want to train-up staff to
cover vacancies
- Employees expected to work longer
hours
Bust – consumer demand falls, - Job losses as businesses reduce in
businesses reduce supply levels investment
→ lower investments, economic - Other employees may have hours
growth slow reduced through part-time and casual
contracts

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- Job security will fall

- Outsourcing becomes popular
- Remaining staff could work longer shifts
and broaden their responsibilities
Globalisation
- Increased level of competition – businesses: restructure, outsource or subcontract
production (compete effectively), relocate production to countries where dispute
levels and labour costs are much lower, need to attract and retain motivated and
effective staff, train in the management of multicultural workforces
Structural Changes in Australian Economy
- Rapid employment growth in service industry e.g. property, retail, tourism, etc.
- Outsourcing of operations with cheaper labour – Aus., blue collar workers are faced
with less job opportunities
- Technology – shopping online has become popular (opportunities for employees in IT
and logistics) but could have negative effect on retail jobs
Mining industry is the driving force of economic growth –demand for labour in
remote areas has resulted in the labour force becoming more geographically
mobile
In 2020 Qantas announced it would permanently cut more than 6,000 jobs from the
company as a result of the financial crisis brought on by the coronavirus pandemic. Jobs
are being lost across the airline, including 1,500 jobs from group operations, 1,450 from
office roles, 1,050 cabin crew, 630 in engineering and 220 pilots.

With the closure of international borders and coronavirus restrictions affecting the
domestic tourism market, travel agent Flight Centre announced it would be temporarily
standing down or making redundant 6,000 sales and support staff around the world,
including 3,800 in Australia.
technological
Positive Impacts of Technology on HR Negative Impacts on Technology
on HR
- Development of more efficient - Loss of employment (increase
production techniques in redundancies) as
- Employees can be upskilled in use technology itself becomes the
of new workplace tech. main tool of production
- Encourages the employee to deliver - Employee resistance to
the product/service in new and change as the workforce
improved ways becomes reluctant to learning
- Fosters a process of continued the use of new technologies
within an organisation - Reduced employee morale as
- Reduces the repetitive nature of the workforce feels their
labour intensive work positions are less valued due
- Foster teamwork whereby staff to the growing importance of
become mentors to colleagues technology
through process of learning the new - Lower levels of employee
technologies empowerment and decision
- New jobs are created making as technology become
a key driver in production
methods

All McDonald's employees use "Metime" - an online platform that is used for such things
as rostering, pay and training. Each employee has a personal login to this system. This
helps McDonald's to maintain effective communication with employees.
McDonald's recently began rolling out self-service kiosks, which remove the need for the
customer to interact directly with an employee to place an order. It has also introduced
machinery such as self-filling drink machines, which take customer orders directly from
the computer system and automatically pour drinks. The impact of this technology is to
either free up staff to complete other duties or reduce staff numbers overall.

In June 2020, Woolworths announced automation of its warehouses would eliminate

about 700 jobs in Sydney and Melbourne.

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social – changing work Changing Work Patterns

patterns, living Social Work Patterns Impact on Human Resources
standards Increasing participation of female in Workplaces must ensure all promotion,
workplace: growth in businesses training and reward policies comply
providing services, increase in with EEO principles- work hours should
female graduates – growth in be family friendly
participation rate
Ageing of the workforce: average age Bus. incorporate planning program
in occupations is increasing (e.g. prior to recruitment to safeguard
teaching) against massive retirement stage –
older employees may want to take up
flexible working arrangements (part-
time)
Greater Flexibility: option of working Upgrade IT services to ensure security
from home is maintained – new policies need to
be formulated, ensure employers are
adequately covered/monitored in a
new work environment
Career Path Opportunities: better Difficult option for businesses
educated, younger and highly skilled particularly when middle layers of
employees expect more than just a management are removed – less
job –expectation of a career path promotional opportunities
and if not forthcoming may seek
alternative employment
Preference towards part-time and Bus. needs to review its operations
casual employer: due to growth in and if possible offer the opportunity for
service sector part-time and casual positions
Living Standards
- Australia has one of the highest living standards in the world today
- High Standards include: occupational health and safety, regular wage increases,
performance bonuses, fringe benefits, leave and superannuation
- Australian and political awareness of pressure from global competition and recognise
importance of these conditions to average Australians
- Companies who seek to undercut conditions – excessive outsourcing and
casualisation of workforce/shifting production offshore (reduce cost and increase
profits) → challenged by union keen to avoid erosion of living standards
- Casualised workers suffer from high levels of stress – difficulty purchasing assets
(e.g. homes + managing finances and debt with unstable or uncertain income)
- Social Expectations: home ownership, holidays and ownership of consumer goods –
important factor in rising participation of women and rising retirement age for women
- Concerns: loss of weekends for families working flexible hours and shifts – blurring
of home/work lives because of electronic communications – creating an expectation
that employees will always be ‘on’
Government Response: implementing legislation – make workplaces more family-
friendly: providing carer’s leave, job share, part-time and flexible working hours

Many McDonald’s restaurants are open for trading 24 hours a day, or have extended
operating hours. Fitting this with a traditional "nine-to-five Monday to Friday" worker is
impossible. Employees in the service sector of the economy now work varied hours
including nights and weekends. This has been a significant change in working patterns.

At its corporate headquarters, McDonald's Australia tries to recognise and cater for
individual staff needs. For example, it has a work from home policy in place, allowing
greater flexibility of when and how work is completed. It also allows employees to start
work earlier or finish later during Monday to Thursday to allow a 1pm finish on Fridays.
On top of this, it offers eighteen weeks' paid parental leave for company employees, and
for parents returning to work, it offers discounted child care and designated breast-
feeding rooms. Employees also have the option of gaining an additional four weeks
annual leave per year by reducing their pay, giving them greater choice and flexibility.

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ethics and corporate Corporate Social Responsibility (CSR) and HR

social responsibility - Effective CSR enhances the reputation and standing of the business within
community + may be used
to promote recruitment of
staff for the business
- Strategies to Promote CSR
within a Workforce: fair
remuneration for
performance (employees
receiving benefits deserve
it), workplace free from
harassment (one that
promotes tolerance and
acceptance), encourages
healthy relationships
between managers and
fellow management,
communication is clear
and two directional, family
time is considered
valuable

In Australia, McDonald's employs approximately 80% of staff on a casual basis. Many of

these are young people (67% of all employees are aged between 14 and 18) working in
their first job who are not part of a trade union. This creates a potential power imbalance,
with managers having the upper hand.

As many of its employees are still completing secondary school, McDonald's Australia
also has a Responsible Student Employment Policy. This "ensures that young full time
students will usually work no more than two shifts per week during term time and in the
case of students 17 years of age or younger they will not work beyond 11pm or before
Sam on a school day.
Processes of human resource management
Acquisition Analysing
Acquisition: stage that Internal environment – business goals and culture – focus may be on growth, downsizing,
involves identifying improved customer service etc. – influence demand for specific skills and helps define
staffing needs, the types of staff needed
recruitment and External environment – economic conditions, technology, legal, social factors→
selection managing for a shortage or surplus of staff
Recruitment – process of locating and attracting the right quantity/quality of staff to
apply for employment vacancies or anticipated vacancies at the right cost – goal is to
The Human Resource create a pool of potential candidates for a job
Cycle: process of Selection – a screening process in staff acquisition - information on each candidate is
acquiring people with gathered which is then reviewed as used to choose the most appropriate applicant
the skills for the job and
the continued Effective Recruitment and Employee Selection
development of - Evaluating and hiring qualified job applicants who are motivated and have values
employee’s knowledge and goals aligned with the business and its culture
and capabilities – also - A fair, non-discriminatory and legally compliant selection policy and process
involves providing - Giving applicants a realistic understanding of their job description and
incentives for effective, responsibilities
reliable employees to - Using strategies that will prove useful for later selection and placement decisions
remain motivated and McDonald's Australia uses a centralised approach to staff acquisition (franchised stores'
stay with the business acquisition processes may vary). Potential applicants must submit details through one
central website - https://apply. Mcdonalds .com.au.
Development Methods to Develop Employee Skills
Development: focuses - Further professional learning
on enhancing the skills - Mentoring/coaching
and capabilities of its - Performance appraisal and management
staff to maintain its Role of the HR Manager: to establish effective training and development programs, train
competitive advantage managers to implement them → evaluate training programs to determine whether
performance has improved as a result of these programs
Training and Induction
Development results in
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increased motivation of - Procedure which introduces the new employee to the business - allows them to
employees, greater become familiar with the firm
business - Well-prepared induction programs: gives employees a positive attitude to the job and
the business, builds confidence, highlights major safety policies and procedures and
helps establish healthy relationships between new and current employees
Training
- Encompasses all activities aimed at improving an employee’s present and future
performance in the workforce → aim is to seek a long-term change in employee’s
skills, knowledge, attitudes and behaviour
- Essential in overcoming business weakness and strengths and the ability of the
business to remain competitive is affected by the extent of training
- Methods fall into two categories: On-the-job training (traineeships, apprenticeships)
or Off-the-job training (TAFE, university courses)
Development
- Involves preparing employees for future responsibilities within organisation due to a
change in the business’ strategies or a growth in its size or market share
- Flatter structures benefit from employee’s ability to develop shared ideas and
solutions to problems → improve efficiency, effectiveness and response to customer
needs however can reduce promotional opportunities and strategies must be
implemented (e.g. job enlargement, job rotation, job enrichment or job sharing)
Mentoring and Coaching
- Increasing need to motivate and develop staff with leadership potential → involves
individual career development/preparation for future roles
- Mentoring: mutually agreed role
- Coaching: performance enhancement by building skills and capabilities overcoming
weakness and resolving specific issues
Performance Appraisals
- Systematic process of analysing and evaluating employee performance for strengths,
weakness and opportunities for development through a formal assessment
Provides a basis for matters such a future training needs, pay rises, promotions and
possible further development

McDonald's Australia spends AU$40 million annually on training, showing that it takes
workforce development seriously. Prior to the first shift at McDonald's, a new employee
must complete an induction program both in­ store and online via the "Metime" portal.
McDonald's Australia has a clearly-defined pathway of progression for employees. This
pathway is supported by structured on-the-job training. McDonald's Australia is a
registered training organisation (RTO). This means it can deliver, assess and issue
certificates in a variety of courses starting with crew trainers completing a Certificate II in
Retail Services all the way to restaurant managers with Advanced Diploma. The
McDonald's Australia website reports that 4,217 employees completed such training in
2013.Having formalised training coupled with practical on-the-job experiences ensures
that McDonald's can tailor development opportunities to be beneficial to the needs of
both the employee and the company.

Maintenance Maintenance of HR Staff

Maintenance: focuses - staff can be maintained through providing the working conditions and work
on the processes environment that motivate staff to be increasingly productive and gain satisfaction
needed to retain staff from their work – if staff remain loyal and stay, then the business will increase
and manage their productivity, improve morale among workers and reduce the level of absenteeism
wellbeing at work Records management is an additional role involving the retainment of records of:
application forms, taxation, earnings, conditions of work etc.
These records may be needed by the employees in the future and are useful tool for
accountability and reference checks

Communication and Workplace Culture

- effective communication strategies support employee participation and a strong
workplace culture – methods communication: regular team meetings between
managers and employees, social functions
- Poor communication is often reflected in workplace conflict and high turnover rates
Employee Participation
- Staff wellbeing is maximised through encouraging staff to participate in decision
making, and giving employees some control over their work lives

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- Employee participation strategies: use of suggestion boxes, regular team

meetings/briefings
- Employees also have the right to a healthy and safe work environment, where work-
related stress and unproductive conflict are minimised
Benefits
- May be monetary and non-monetary
- Typical benefits: flexible working arrangements, paid training opportunities, travel
allowances
- Offering family-friendly programs that support work-life balance is critical in
workplaces where staff are increasingly asked to do ‘more with less’ – these include
flexible job roles such as job sharing, multiskilling, telecommuting, part-time work
and flexible working hours to suit family needs
Legal Compliance and Corporate Social Responsibility
- All employers are required by law to ensure that human resource procedures and
policies comply with existing legislation including anti-discrimination and sex
discrimination legislation, occupational health and safety and taxation
Separation Separation may be on a voluntary basis, where the employee wishes to leave of his or her
Separation: ending of own free will or may be involuntary, where an individual member of staff is asked to leave
the employment Voluntary
relationship – this - Retirement: when an employee retires, the employee has decided to give up full-time
separation may come or part-time work – people may retire due to ill health, lack of motivation, or a desire
from either the to pursue leisure activities
employee and employer - Resignation: is when an employee leaves their jobs for reasons such as need for
– the termination of the change in their lives, or because they wish to move away from their current job
employment contract - Voluntary Redundancy: is where the existing job is no longer required by the firm and
between the employer the employee may be offered a redundancy package
and the employee Involuntary Separation: is where management decide which employees will no longer be
required
- Involuntary Redundancy: the termination of employment due to the firm closing down
or the job no longer being required due to rationalisation, restructuring or new
technology – the Employment Protection Act 1982 (NSW) provides a minimum scale
for severance payments for all permanent employees under NSW awards whop work
for an employer with more 15 employees
Dismissal: occurs when the employer terminates an employee’s employment contract
due to the unacceptable conduct or behaviour of the employee – it can be instant or
summary dismissal or a dismissal after a series of warnings
- Instant or Summary Dismissal: the immediate termination of the employee’s contract
without notice (e.g. in cases of theft, or flouting a drug policy)
- Dismissal after a Series of Warnings: follow incidents such as continual lateness or
failing to perform the duties as required
Management of Separation
- To avoid of discrimination and adverse effects on the morale and productivity of
remaining staff, involuntary separation must be managed carefully and in
compliance with legislation, awards and agreements
- Acceptable situation for redundancy would include: closure of the workplace site,
completion of project on which employee worked or lack of contracts
Workers may also be classified as on probation or temporary
- Probation: workers are often hired and given a probationary period of approximately
3-12 months to ‘prove’ themselves
Temporary: those employed for short period of time to replace an absent worker – this
could be for one day or several months
McDonald's has a significantly higher staff turnover than many other companies. A report
in the United States suggested that this could be as high as 44% annually. However,
McDonald's appears to reducing the rate of staff turnover in some countries. For
example, according to McDonald's website, in the UK "the average length of time a crew
member stays with us has increased from 18 months to 2½ years." An average of 2.5
years equates to 40% annual turnover rate.

McDonald's Australia also conducts anonymous exit surveys of employees. Management

would use these to ascertain why staff are leaving and put in place strategies to prevent
this.
Strategies in human resource management

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leadership style Leaders make decisions, develop strategies for the development of the business and
interact with employees
- It is crucial for a leader to provide direction, implement plans and motivate staff in a
manner that enhances employee workplace performance
Types of Leadership Styles
Authoritarian Style: managers lead, based on the view that they are responsible for telling
their employees what they want done and how to accomplish the task
- no role for employees to contribute to the decision making process
- Used when decisions must be made quickly and management have researched the
issue and have the information to solve the problem

Democratic/Participative Leadership: leader including one or more employees in the

decision making process – employees are consulted about what to do and how to do it
- Encourages employee empowerment and recognises the knowledge and skill of staff

Satya Nadella, Microsoft CEO allowed employees to make their own decisions. He
allowed them to take centre stage and gave them confidence.
Delegative/Free-Rein Leadership: leader allows employees to make decisions –
employees have the relevant knowledge and skills to make decisions
- Managers trust the ability of employees to make the decisions
An effective makes use of all three leadership styles – the most appropriate choice of
style is dependent upon the knowledge and skills of staff, the extent of the decision being
made, the time available and the existing personal relationship between the leader and
staff
As McDonald's has approximately 38,000 stores worldwide and operates using strict
business guidelines, it follows that the management of the corporation might be viewed
as somewhat autocratic. McDonald's has a very structured hierarchy, starting with a crew
member all the way up to store manager and consultant. This sets a defined chain of
command through the local store, consistent with autocratic leadership. This leadership
strategy allows for consistency and uniformity across stores.
job design – general or Job Design:
specific tasks - Takes place before employees are recruited
- Determines the responsibility of an employee
- Outlines scope of the decision-making of an employee and the amount of authority
they have
Goals of Job Design
- Increase productivity from staff, and efficiency and quality in operations
- Satisfy workplace needs of employees, such as having an interesting job which
increases motivation and loyalty
General Tasks
- Unskilled or don’t require specialised skills or training – allows many employees to
complete different tasks
- Health and safety issue could arise e.g. repetitive movements of menial tasks
Methods to Overcome Issues with General Tasks
Job Rotation: when employees rotate or move to other jobs
- Employees do a number of different tasks → gain a wider perspective of the
business and an appreciation into the jobs other undertake however make take staff
away from job they excel in
NBN – employees have a 2-year rotation, spending a few months in each business unit
Job Enlargement: when jobs are broadened to include a number of additional duties
- Increases employee participation and their job satisfaction
- Risk when employees are given tasks that exceed their own knowledge and expertise
Job Enrichment: employees are given the freedom and responsibility to make decisions
- Seeks to make use of employee’s talents and abilities within the workplace
- Self-motivated employees enjoy the challenge offered – use this to enhance career
Flexible Work Structure: employees are offered an alternative to the traditional
employment contract
- Include: casual work, telecommuting, part-time, flexitime and/or placed in teams
- Suits the balance between family and work life
- Boost in productivity as employees enjoy the ability to work in their own
environments
- Can create communication problems as well as security issues
Specific Tasks

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- Tasks require particular skills and training

- Result in specialisation, which can increase performance, output and quality
- It can become routine and boring

McDonald's employees have specific tasks built into their job design with little or no
scope for change. This task-oriented job design is a contemporary example of Taylors'
scientific "one best way" methodology in action. A sheet of instructions and specific time
frame for a job is evidence of a task-oriented approach. Founder Ray Kroc once said 'I put
the hamburger on the assembly line." This strategy allows for consistency, efficiency and
uniformity across stores.
recruitment – internal Internal Recruitment: Occurs when the position is filled by existing employees within the
or external, general or business
specific skills - Benefits: incentives for staff to improve their performance, promotions seen as
Recruitment: strategy reward for effective work and the employee having an existing understanding of the
whereby management culture of the business
seek to employ an - Disadvantages: may cause unhealthy competition, loss of motivation from
individual for a vacancy overlooked staff, business may deny new ideas from external individuals
that exists within the External Recruitment: position is filled by an individual who has not yet worked for the
organisation business
- Benefits: encourages new ideas and the new employee is not aware of existing issue
An analysis of the job within the business
must be completed – - Disadvantages: the new employee may take time to settle in and there is potential
selectors know what for resentment from existing staff
skill characteristics Issues to Consider in the Recruitment Process
applicants must Need to Replace Staff Must be Carefully Considered
possess, what qualities - Management must consider if it is possible to spread the workload over existing
and attitudes are employees – as this has the benefit of upskilling existing employees and making cost
desirable and what savings
characteristics may be Specialised Recruitment Firms
a disadvantage - The complexities involved in HRM- businesses should if the use of these firms is
more relevant to their needs – may allow a greater degree of expertise to be used in
the recruitment process
General or Specific Skills
General Skills
- Focus on attracting staff with general skills, attitudes and behaviours that are a good
cultural fit for the business
- They are expected or required by the majority e.g. competent in computer programs,
working independently with min. supervision and be flexible with work hours and
tasks
Specific Tasks
- Skills required for a particular position, identified in the planning stage of acquisition
- These skills are increasingly directed at qualifications and/or experience e.g.
university degrees, TAFE qualification
-
Most McDonald's employees start as crew members and are thus recruited externally. A
central application process makes the recruitment process more efficient and
streamlined for local managers, and consistent online screening of applicants can help
ensure that new recruits fit McDonald's requirements of an employee.
Most management positions both at the local store and then at corporate
headquarters are filled internally via the promotion of existing employees. As such,
managers have specific skills and an intimate knowledge of how the business
works. They also complete training through McDonald's RTO in courses relevant to
their positions. McDonald's website reports that 51% of restaurant managers in
stores owned by the company started their careers as crew members.
McDonald's also recruits for corporate jobs directly from the external environment .
training and Training
development – current Some training may be carried out in-house while other training may involve completing
or future skills Training: external training or online courses
educating an employee Development
in the skills and - Usually applies to employees who have been identified as having the potential to fill
processes of the job managerial positions in the future
that the employee
currently holds The distinction is that training develops skills for the current needs of the business while
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And Development: development looks to the future needs of the business.

selecting employees for An ongoing commitment to training and development can lead to:
educational programs - Increased productivity
that focus on roles that - Increased creativity
employee may aspire to - Cost efficiencies
in the future - Attracting, motivating and retaining staff
- Competitive advantage
McDonald's provides extensive training opportunities for its employees and franchisees.

Before being offered the opportunity to purchase a store, potential franchisees must
undergo extensive training and development. ln Australia, the minimum timeframe for
this is nine months full-time, during which trainees are unpaid.
performance Communication Process: ongoing process between supervisor and employee
management – - Clarification of expectations
developmental or - Setting of employee workplace objectives
administrative - Providing feedback
Performance - Evaluating employee performance
Management: process Administrative
of reorganising the - Focus on collecting data to manage the HRM function more efficiently
efforts and - Ensure individual and business goals are aligned and strategic goals are met
contributions of - Can involve an annual appraisal of employees
employees to their work Developmental
- Focus on using data to develop individual skills and abilities of employees →
improve individual effectiveness in their roles, overcome weaknesses, are prepared
for promotion
Benefits of Performance Management
- Improved understanding of how their role contributes to the success of the business
- Clear understanding of what needs to be done to be successful on the job
- Employer is able to identify any problems early and assist the employee with
improving their performance
Performance review and improvement is ongoing and allows the employee to be
continually aware of their own personal goals and business goals

In Australia, the latest McDonald's Corporate Responsibility and Sustainability Report

states that "all corporate employees and restaurant managers receive an annual
performance and salary review and this determines their pay increases and possible
bonuses." At the store level, crew members are encouraged with "pins" (small badges)
that they wear to signify achievement. The company also rewards performance with
awards such as "Crew Member of the Month".
rewards – monetary - Rewards motivate all employees to work to their potential and cooperate with each
and non-monetary, other to achieve the goals of the business
individual or group, Types of Rewards
performance pay Monetary Rewards: those that involve a monetary value e.g. higher salary, bonuses,
Rewards: designed to commission
reward employee Non-monetary Rewards: the additional benefits offered that do not involve income e.g.
performance, to social group and functions, gym or club on the site
acknowledge this level Intrinsic: rewards that individuals achieve themselves from the job or workplace such as
of commitment and the knowledge they are appreciated by superiors e.g. career positions or promotions,
celebrate the offers presenting training to others
achievement of Extrinsic: tangible rewards offered at the workplace e.g. holidays, leave provisions
business goals Individual Reward: offered to specific employees identified as producing positive or
substantial effort within the organisations
Group Rewards: offered to a group or team of employees

Performance Pay: process of linking part of an employee’s income to their performance

at work
- As the employee reaches targets and demonstrates improved performance through
increased pay
- This concept of performance recognition reflects a belief that employee motivation is
derived through increased financial benefits
Advantages Disadvantages
- Performance may improve as - Performance of employees may
employees work more effectively be difficult to measure for some

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- It encourages unmotivated and jobs as they are influenced by

inefficient individuals external factors such as attitudes
of consumers, health and cultural
concerns etc.
- Some employees may only seek
non-financial rewards

McDonald's offers a range of rewards for staff members. These include discounted food
and beverage prices (up to 50%), promotions, group and individual performance pay and
awards and prizes.
For example, McDonald's Australia rewards top performing employees with what is known
as "The Macca's Enjoyment Bonus "where top employees are rewarded with the granting
of wishes.

McDonald's corporate headquarters employees may be eligible for company cars, health
services, discounted child care and fitness memberships. Additionally, they are offered a
profit-sharing plan, aligning the goals of the employee with those of the company.
global – costs, skills, Cost
supply - Initial cost of outsourcing or relocating employees will be high
Global: a productive - Long-run labour costs will be lower moving offshore – including wages and non-
use of the global wages
environment in terms of Skills
employment can allow - Skills vary in different regions but in recent year developing markets (China and
a business to utilise India) have dramatically increased their skills (e.g. finance programs in India)
labour that provides the - Global businesses balance reducing costs by accessing cheap labour against the
skills needed at a lower cost of training labour with the skills required by the business
cost and therefore Supply
remaining competitive - Developing world have a large pool of cheap and recently, skilled employees in
countries such as India, Sri Lanka and the Philippines
Three Approaches when Determining the Employment of Staff
- Polycentric Staffing: overseas operations use local staff while maintaining existing
staff in their headquarters – this has cheap labour costs and provides local market
knowledge – however, the local workforce may develop practices that don’t fit with
parent company’s culture
- Geocentric Staffing: best or most skilled employees are selected from any region in
the world – recruitment is conducted globally and staff are chosen based on ability
regardless of culture – this selects the best candidates although it may be difficult to
develop a culture that suits the local community or the parent company
Ethnocentric Staffing: parents company or home employees staff the new global
enterprise – culture and practices are maintained meaning no inconsistency – though it
may cause conflict in the local market due to reduced employment opportunities

As a global business, McDonald's is able to offer employees scope to work in different

locations around the world. The Macca's Prospectus for employment applicants states
that employees can "access other exciting opportunities such as working internationally,
participating in cross functional teams with colleagues in other count s and
leading the organisation. 'The uniform nature of the McDonald's system throughout the
world also means that many employee skills are transferable between countries.
As a global company, McDonald's operates in many countries with differing employment
laws, minimum wage rates and availability of labour. As such, a large disparity exists
between the costs of workers in one country compared to another. According to The
Huffington Post, the lowest paid McDonald's workers (India) earn around US 50 cents per
hour, while the highest paid workers are in Denmark, earning around US$20 per hour.
Telstra cut 300 jobs in 2016 to outsource call centre jobs. This brought the total to
10,000 overseas workers. Wages over there are $9 USD per day.
Many manufacturing companies have outsourced overseas (eg Target has factories in
Bangladesh, Cambodia, China, India, Indonesia, Pakistan and Vietnam).

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workplace disputes – - Conflict between stakeholders is inevitable as conflicting interest such as the desire
resolution – to gain the highest possible profit may contradict with higher pay and better working
negotiation, mediation, conditions
grievance procedures, Industrial Dispute: notification of a disagreement with an employers and employees over
involvement of courts matters dealing with the workplace
and tribunals Industrial action is often associated with disputes in an effort to force a resolution and
Workplace Disputes – can be overt or covert
Resolution: conflicts, Overt: actions that is obvious for all to see
disagreements or - Strikes: withdrawal or refusal by labour to provide their service – legal requirement:
dissatisfaction between only occur at the negotiation stage and notice must be given
individuals and/or - Pickets: protests held by staff outside a workplace – usually at the entrance to
groups prevent normal business practice and attract publicity to boost a resolution
- Bans: employees refuse to perform a specific task
- Lockouts
Collective Bargaining: - Work to Rule
negotiations over - Stop Work Meeting
workplace disputes
within an organisation In September 2020 strikes were happening at the Patrick, Hutchison and DP Shipping
terminals at Brisbane, Sydney and Melbourne over pay and working conditions with a
host of liners bringing in congestion surcharges as a result. “Australia relies on shipping
with 99% of our trade moved by sea, so it is absolutely vital we see a quick resolution
achieved between all parties,” said Michael McCormack, Australia’s deputy prime
minister and minister for infrastructure, transport and regional development.

Covert: actions that are less visible – just as effective in displaying unrest or
dissatisfaction with the employment relationship
- Absenteeism: small groups or individuals may decide to organise formal
absenteeism – take the same day off or roster days off
- Sabotage: individual to break or damage equipment or procedures so that work
cannot be carried out
- Staff Turnover
- Exclusion from Decision Making: employers diminish the role of employees
Main Causes of Industrial Disputes
- Changes in management policies, remuneration, health and safety and political
Resolution of Disputes
Negotiation: parties directly involved in the dispute discuss the issues and attempt to
resolve the issue without outside parties
+ When confronted by the opposing party there is a likelihood of compromises being
offered – quickest resolution to the issue
Mediation: neutral party is employed that is skilled in encouraging both parties to reach a
conclusion (could be from Fair Work Australia or Human Rights Commission)
+ Use of mediators enables parties to concentrate on the issue – speed up resolution
process
Grievance Procedures: the rules and procedures that employees, unions and employers
must follow in order to resolve a dispute - formal procedures written in to awards and/or
enterprise agreements designed to resolve disputes
- Grievance Procedures Policy: provides a clear outline of the issues, illustrates the
correct and appropriate processes when raising a complaint and provides a
mechanism that can be used to achieve a quick resolution of disputes
+ Resolve issues before they escalate
+ Use of an official procedure and one created by both parties → more likely to reach
resolution
+ Fair Work Australia recommends issues be quickly resolved, handled sensitively and
professionally – manner is fair and confidence is maintained
Court Action:
Conciliation: attempt to settle the dispute by offering an outcome
+ Legally binding decision – enables parties to convince their members (unions) to
accept the decision and resolve the dispute

In 2016 the Fair Work Commission rejected the agreement struck between Coles and the
Shop, Distributive and Allied Employees Association (SDA) because the
agreement had left the 77,000 workers it covered worse off than under the
award.
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Arbitration: courts hand down a decision that is legally binding – commissioner hears the
cases put forward by both parties and then makes decision
Common Law Action: occurs one party feels the other resolution methods have been
inadequate and seek action in a superior court – expensive and last resort
+ Only taken when essential in operations of the business – common law action forces
the wronged party to either take or prevent action to bring about a fair resolution,
according to the law
+
Woolworths, on average, underpaid its staff up to $33 million annually in the past nine
years – the Fair Work Ombudsman has found.

Benefits and Costs of Workplace Disputes

Financial
+ Employees may gain a wage/allowance increase – could be based upon higher
productivity
+ Management benefits from a streamlined operation designed to boost its
productivity
- During the dispute employees may lose financially through loss of income in overt
action
- Management may have to cancel orders – reduces their profitability over this period
Personal
+ New agreement could foster a new era in human relations based on benefits both
parties can achieve
- The HR relationship could lose confidence during the dispute – affecting long-term
culture
- Stress levels may increase due to changes made
- Employees may feel they have less job security
Social
+ New practices involving multi-skilling and the notion of team-work could build staff
morale and relations
- Potential for community outrage over the loss of goods/services during the dispute –
could build upon an existing perception of either the employees or the entity

McDonald's has clear employee grievance procedures set out in the Standards of
Business Conduct - The Promise of the Golden Arches booklet. Employees can discuss
issues with direct supervisors (or other managers) or the employee can directly contact
the Global Compliance Office and report an issue (which may sometimes lead to
mediation). In Australia, McDonald's has a Workplace Relations Team which takes calls
directly from employee of McDonald's (and franchisees) who have unresolved issues.

McDonald's also involves unions and other legal institutions when necessary to negotiate
employee pay and conditions. As an example, the current award for McDonald's Australia
employees was negotiated between McDonald's and the SDA and was checked and
approved by the Fair Work Ombudsman.
Effectiveness of human resource management
indicators Corporate Culture: refers to the shared attitudes, values and practices within the
Indicators: how business
successful the HRM - Employees are a business’ most valuable asset it makes sense that a business
approach is at providing would develop a cooperative and effective corporate culture with positive working
a human resource relationships
package that can Indicators that reveal a workplace has a poor corporate culture include
effectively achieve the - High staff turnover
business objectives - Poor customer service
- High levels of absenteeism
- Accidents
- Disputes and internal conflicts
These problems are reflected in poor business performance, lower sales, lower profits
than competitors and the bottom line

Uber lost nine executives due to bad culture. Company’s “hustlin’” culture had
encouraged “poor behaviour”, how illicit drugs and alcohol were being used at work
events.
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Benchmarking Key Variables: comparing the business or employee’s performance

against industry or worldwide standards
- If employees are unable to meet performance goals on a regular basis – clear to
management they must examine the issue
Changes in Staff Turnovers: rate at which employees leave a business
- Possibly the wrong people were hired or are not being trained properly or there are
possible workplace problems, they are unmotivated and feel compelled to leave
Costs related to Staff Turnover
- Time and money to acquire new workers – workplace is disrupted while the vacated
position waits to be filled and the new employee settles in
- Employees represent investments by the business through training and development
and these valuable skills may be going to competitors
Absenteeism: employees being unable to attend work for reasons such as illness or
family responsibilities
- High levels of absenteeism indicate HRM has been ineffective by revealing that there
is a mismatch between the worker and the business
Costs of absenteeism:
- Business pays for the illegitimate days off
- Less work is completed and temp workers have to cover the absence
- Absenteeism is unpredictable – last minute decisions lead to higher costs and make
it harder to deal with effectively
Accidents: all workplaces across Australia must be aware of potential hazards
- Employees may not have had adequate training in safety or are unmotivated which
can lead to carelessness and accidents
Cost of Accidents
- Workers may be hurt, putting them out of action and equipment or products may be
damaged
- Business may fall short of WHS laws and may be legally liable to accident victims
- Bad for the reputation of the business
TESLA had a lot of injuries at their factories and workers too many days away. Workers
had been “having a hard time, working long hours, and on hard jobs”.
Levels of Disputation
- The more disputes there are in a workplace, the less effective management is in
managing the employment relations function
- Disputes are disruptive, create tension and reduce morale in a business and can
greatly damage a business’s reputation – goal of management to avoid these costly
disputes
Worker Satisfaction: refers to whether employees are happy and content and fulfilling
their desires and needs at work
- Main goal of HR is to ensure workers are committed and motivated – key to boosting
productivity
- Worker satisfaction covers a range of issues – interesting and rewarding employee’s
tasks, levels of pay, working hours and the physical workplace
- Worker satisfaction can be assessed by regularly surveying workers and through less
formal or rigorous methods e.g. casual chats or for invitations for employee feedback
Banks are facing a crisis, costs of employee turnover are getting higher with employee
dissatisfaction and voluntary staff turnover on the rise.

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McDonald's Australia conducts and publishes the results of national surveys that it
conducts with crew, managers and corporate staff. In the case of corporate employees,
the survey is conducted by an external company, AON Hewitt, which then compares the
results with other companies across Australia (benchmarking) and provides detailed
feedback to McDonald's Australia management.
The results of the most recent published survey (2011) include:
Crew
• 87% of crew agreed that rules and policies are applied fairly and consistently.
• 85% of crew believe that they receive recognition or praise for good work.
• 80% of crew are proud to work at McDonald's.
Managers
• 87% of managers agreed that they have a clear understanding of their goals and
objectives.
• 75% of managers feel valued as employees at their restaurant.
Corporate Employees
• 84% of corporate staff understand how they contribute to the organisation's goals
and objectives.
• 82% of corporate staff said they get a sense of accomplishment from their work.
McDonald's UK has indicated that "the average length of time a crew member stays with
us has increased from 18 months to 2½ years." Lowering staff turnover often indicates a
happier, more content workforce.
The latest available statistics show McDonald's Australia improving in the area of
workplace safety.

Other resources:
Apple case study notes:
https://tablo.io/christanphotography/everything-business-studies
QANTAS
http://businesscasestudy.com.au/category/qantas-news/

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