2013_slides_bm_unit_3_aos_1__2013.ppt

Success in VCE Business ManagementKeep notes and handouts organised (a workbook for any class notes and exercises done and a folder with plastic sleeves for handouts)Prepare summary notes from the textbook(s) you have and the slides referred to in class (summary diagrams or notes with heading and bullet points etc.WORK ON A CONSISTENT BASIS (a bit (30+ minutes) most days not a lot one day and nothing for 6 days)DO THE MAJORITY OF THE TASKS GIVEN TO YOUMAKE EFFECTIVE USE OF CLASS TIMEReview the days lesson in the evening (look at the class slides / read the textbook sectionHave some interest in current events / affairs involving businessesDO THE REVIEW QUESTIONS GIVEN TO YOU BEFORE AN ASSESSMENT (SAC)

SUCCESS IN VCE = GETTING YOUR BEST RESULT

Involves a partnership !!!!!

VCE Business Management Unit 3 & 4

*http://www.vcaa.vic.edu.au/vce/studies/index.htmlOutcome 1

On completion of this unit the student should be able to discuss and analyse the context in which large-scale organisations operate.

Chapter 1*Yr. 12 Business managementUnit 3 - Corporate Mgt - AOS 1 Large scale org. in context

*Key knowledge

the context which contributes to the unique nature of large-scale organisations;

characteristics of large-scale organisations;

variations in types of large-scale organisations, their objectives and related business strategies;

typical management functions in large-scale organisations, including operations, finance, human resources, marketing, and research and development; contributions, both positive and negative, of large-scale organisations to the economy;

internal and external (operating and macro) environments of large-scale organisations;

performance indicators used to evaluate the performance of large-scale organisations, including the percentage of market share, net profit figures, the rate of productivity growth, the number of sales, results of a staff and/or customer satisfaction survey, the level of staff turnover, level of wastage, number of customer complaints and number of workplace accidents;

identification and characteristics of stakeholders of large-scale organisations, including their interests, possible conflicts and related ethical and socially responsible considerations.


Key Knowledge:

The context which contributes to the unique nature of LSOs

(Section 1.1 in textbook)*


What is an organisation?

2 or more people working together

Has an internal structure: - positions of responsibility

- tasks to be carried out by certain people

Use of resources... (human, natural,& capital (man-made)

to create a product or service (output)

Has goals or aims to be achieved, as expressed broadly

in a Mission Statement and Vision Statement.

From goals or objectives, strategies (plans of action)

are undertaken to achieve those goals

What is an organisation?

Adding these elements together, we arrive at

the following definition:

An organisation is a structured arrangement where two or more people work together to achieve some specific purpose. They take physical, human, capital (man-made) inputs, then process them to create outputs of goods and/or services.

Examples: Large Scale Organisations

Large scale organisations make up less than 1% of all businesses in Australia

however, they generateapproximately 56% of total revenue and are vital to Australias economy*

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The unique nature of LSOsLSOs have complex management structures due to their size often with many departments

LSOs can produce of goods and services more cheaply than smaller businesses because they produce large volumes and thus can spread their costs over a greater number of units produced; LSOs can take advantage of economies of scale

LSOs have access to large amounts of financial funds which allows them to expand their business

LSOs can influence Governments because of their size and their needs (can influence legislation, the building of infrastructure etc)

Operate in many countries

Can have many owners who are not involved in the day to day operations of the organisation

The growth of LSOs

LSOs have grown in number and size over the past 30 years due to:

Globalisation of & deregulation of markets

- increased trade and

- movements of people and financial resources between countries - Governments allowing more foreign investment and competition from overseas businesses

Improvements in technology and communications

- make it easier for organisations to expand nationally or

internationally, thus increasing their size.

Larger businesses can take advantage of economies of scale ( lower unit cost of production as fixed costs can be spread over more units produced)

Key knowledge:

Characteristics of LSOs


Characteristics of a LSO

More than 200 employees (Australian Bureau of Statistics definition)

Turnover / sales / revenue in the millions of $ per annum

Profit in the millions of $ per annum

Assets in the millions of $

- items of value: land & buildings, cash, machinery, furniture, equipment, vehicles etc. - Generally accepted that LSO assets worth > $200 million

Numerous branches / outlets nationally or internationally

a large network of stores nationally,

transnational corporation,

multinational corporation

Characteristics of a LSO

Large percentage of the market share in their industry

Eg: Woolworths has 45 % of the market share in the food and liquor industry

What is meant by market share ?

Number of customers compared to ____________________________________

Total number of customers in that industry

Sales revenue or profits achieved compared to ________________________________________________________________

Total sales revenue or profits of all businesses combined within the industry

CHECKLIST- Characteristics of a LSO

Employ over 200 employees

Over $200 million in assets

Extensive operations, often multi-national

Significant percentage of market share

Revenue and profits in the tens of millions of dollars

Large Scale Organisation?

Examples of LSOs

Qantas

- 36000 employees Sales revenue $16.2 billion Profit (after tax) $970 million

- Over 200 aircraft (assets) - 36,449,000 passengers carried to 140 destinations in 37 countries

BHP Billiton

- 41000 employees - Sales revenue U.S $59.5 billion - Profit U.S $15.4 billion - 100 operations (mines) in 25 countries

Amcor Ltd

- 21000 employees - Sales revenue $11 billion - 260 factories in 38 countries

ACTIVITY- LSO Characteristics

2009 BUS MGT EXAM

Question 2Wombat Airlines is a large-scale .......

a. Describe two characteristics that would identify Wombat Airlines as a large-scale organisation.

Typical management functions in large-scale organisations, including: operations (Unit 3 Area of study 3)financehuman resources (Unit 4 Area of study 1)marketingresearch and development


A Typical Organisational Structure

OperationsMarketingR&D

FinanceHuman ResourcesOther functions may include:Information Technology, Public Relations, Legal etc.

Chief Executive Officier (CEO)Board of Directors

What are Management Functions?

The functions of management are the different key areas of work within an organisation

These functions or departments include such areas as:

OperationsFinanceHuman Resources MarketingResearch & Development

Management Functions

Operations ManagerDeals with the actual production of goods and services

Finance ManagerDeals with the monetary, accounting and financial aspects of the business including preparing accounting reports and financial budgets

Human Resources ManagerDeals with recruitment, training and well being of the staff, employees

Management Functions

Marketing ManagerDeals with promotions, prices and distribution of products, as well as gaining new customers

Research & Development ManagerDeals with the generation of ideas and the development of new goods and services, as well as testing the quality of the product.

ACTIVITY- Management Functions

Classify the following activities according to their management function:

Preparing monthly profit reportsRecruiting new employeesRunning an employee in-house training programPlanning the production runs for the next month and maintaining machinery & equipment on the production lineReviewing the organisations OHS policyPreparing a new television advertising campaignDeveloping a new and improved product

Key knowledge:

Variations in types of LSOs, their objectives and related business strategies

(Section 1.2 & 1.3 in textbook)*

Types of LSOs

Large Scale Organisations can be of 4 main types:

1) Corporations (Companies)

2) Not for Profit Organisations

3) Government Departments

4) Government Business Enterprises (GBEs)

Types of LSOs

1) Corporations

owned by shareholders managed by a CEO & a board of management (Directors) who are elected by the shareholdersAim is to maximise profit for shareholdersOwners (shareholders) have LIMITED LIABILITY (not personally responsible for the corporations debts if it is unable to pay them)

Two types of corporations:

Public Companies (.Ltd)

Private Companies (.. Pty Ltd)

Types of LSOs

Public Companies Ltd

Are listed on the Australian Stock Exchange (ASX) Listed companies ASX

Raise funds by offering shares (units of ownership) to the public via the ASX

Unlimited number of shareholders (At least 5+)

Public is able to buy and sell their shares (units of ownership) in the Company

Shareholders are able to receive dividends (part of the profit) based on the number of shares they hold. Dividends are declared once or twice a year

Types of LSOs

Public Companies Ltd

Shareholders are also entitled to vote at the Annual General Meeting (AGM)

Why be a shareholder in a public corporation ??

Shares may increase in value if the company makes good profits (your investment is worth more)Receive dividends hopefully at least once a year

What is meant by market capitalisation ?

The total number of shares held by the public x Value of each share

Basically, it is a measure of the overall value of the listed company.

Types of LSOs

Private Companies (.Pty Ltd)

Not listed on the ASX (dont initially need to or want to raise funds from the public)

Created by individuals who buy the units of ownership and become the shareholders (often family members). THEY COMMENCE A PRIVATE COMPANY RATHER THAN A PARTNERSHIP OR SOLE TRADER BECAUSE THEY WANT THE BENEFIT OF LIMITED LIABILITY !!

Maximum of 50 shareholders

Examples

Rip Curl, Retravision, 7-Eleven.

Types of LSOs

2) Not for Profit Organisations (also called NGOs non-government organisations)

Private sector organisations, such as charities and

foundations

Charities - ultimate objective is to lessen social problems to benefit the community

Foundations set up to raise money for a particular social issue and raise awareness of that issue (eg Leukaemia Foundation)

Examples

Salvation Army, World Vision, Australian Conservation Foundation.

Types of LSOs

3) Government Departments

Exist to implement Government policies and provide important services to society

Operate on a pre-determined budget (It receives money from the Government each year which it spends on services it is responsible for. It does not generate revenues / sales. It just spends money allocated to it for the year. It does not produce a profit.

Headed by a Minister (an elected member of the Government selected by the PM/Premier) with Government employees (public servants) in the department

Examples: Department of Agriculture Fisheries and Forestry / Defence / Health and Ageing / Education, Employment and Workplace Relations / Foreign Affairs and Trade

Types of LSOs

4) Government Business Enterprises (GBEs)

Not listed on the ASX

Owned & operated by the government (public sector) they are not shareholders

Government elects a management team to operate the organisation (Board of Management)

Has sales revenues and expenses (costs) like a corporation

Aim is to maximise / produce a healthy profit like a public corporation but also there is a community service aspect

Examples

Australia Post, Medibank Private, Vic Roads.

Types, Objectives & Strategies of LSOsPrivate SectorOwned by Private individualsPublic SectorOwned and run by the GovernmentGovernment DepartmentsGovernment Business EnterprisePrivate CompanyPublic CompanyNon Profit OrganisationsNot on ASX

2-50 ShareholdersRestricted transfer of sharesObjective to make a profit for shareholdersRip Curl Pty LtdListed on ASX

5+ ShareholdersShares traded on ASX

Objective to make a profit for shareholdersQantas Airways LtdRun like a Corporation but NOT ON ASX

Profit but also service motivated

Make a profit for the government but also to provide a service

Australia PostMedibank PrivateSeen to be inefficientBureaucratic (Minister in charge with many public servants)

Service motivatedDoes not generate salesGiven a predetermined budget (money) to spend each year

Defence DeptCharities & Foundations

Objective to raise funds to provide for a cause or for the disadvantagedWorld Vision AustraliaSalvation ArmySt Vincent De Paul Society

*Copy & Paste illustration into notesYr. 12 Business managementUnit 3 - Corporate Mgt - AOS 1 Large scale org. in context

Key Terms

Privatisation (GBE turns into Public Corporation)

Where a government business enterprise (GBE) is sold to private investors or floated on the ASX, and the business is run primarily to make a profit; (i.e. Public sector asset or organisation now becomes part of the private sector)

Governments traditionally are seen to run inefficiently so privatisation will mean:

Cash injection for the Government because they sell itlower prices for consumers as the business becomes more efficient to run and have lower costs

E.g. Telstra (89% shares held by public, and 11% by government) CBA was once government owned

Key Terms

Public SectorGovernment ownedPrivate SectorNon-Government owned. Owned by private enterprise individuals or groups of people. Public Private Partnership (PPP)

A joint venture between the Government and private enterprise in order to complete a project.

The government benefits by creating infrastructure for the community, without having to finance the entire project , and the private organisation benefits by gaining exclusive operation of the asset for an agreed period of time in order to earn revenue.

E.g. Eastlink Citylink Desal plant in Victoria

Objectives and Strategies of LSOs

Strategies (Plans of action)Mission StatementVision StatementObjectives

What is a Vision Statement ?

A brief statement that broadly describes the future direction and outlook of the organisation.

It is the organisations value and philosophy

E.g. Telstras Vision

To improve the way people live and work

What is a Mission Statement ?

Sets out the reasons for the LSOs existence &

its principal activities

what the corporation does why it exists

E.g. Telstras Mission

We build technology and content solutions that are simple, easy to use and valued by our customers. We strive to serve and know our customers better than anyone else

What is a Mission Statement ?

Eg: Commonwealth Bank Ltd

To be Australias finest financial services organisation through excelling at customer service

Eg: Coles

To give the people of Australia a shop they trust, delivering quality, service and value

What are objectives?

Describes the goals or aims of the organisation for the short, medium and long term.

The purpose is to fulfil the companys Mission.

Examples...


Financial Objectives

Includes the level of profits, market share and revenue.

Eg. Company may want to increase profits by 10% in 2011

Service Objectives

Provide a level of service to the customers.

Eg. To reduce the time spent by customers on hold by 5% before May 2011


Social and Ethical Responsibility Objectives

Becoming caring corporate citizens.

Eg. To increase donations to charities by 20% in 2011

Environmental Objectives

Caring for the environment and reducing our impact

Eg. To reduce carbon footprint by 15% by 2013

What are strategies?

Statements of actions or plans outlining how the

objectives are to be achieved

What is the link between objectives and strategies ?

Objectives or goals are formulated based on the organisations vision and mission and then plans of action or strategies are formulated to ensure that objectives are achieved

Key knowledge:Contributions, both positive and negative, of large-scale organisations to the economy

(Positive Contributions Section 1.4 in textbook)(Negative contributions Section 1.5 in textbook)*

LSOs- Positive Contributions

LSOs contribute to the nation in many ways including:

Economic GrowthEmployment (direct & indirect)Research & DevelopmentInfrastructure growthExport IncomeIndustrial BaseTraining and Skills Development


Contribute to economic growthLSOs are continually expanding and producing more products leading to an increase in the nations Gross Domestic Product (GDP), which is the total market value of all goods and services produced in Australia in a year

LSOs contribute roughly 55% of Australias GDP


Employment (Directly & indirectly)

LSOs provide employment opportunities to approximately 2.7 million Australians, the equivalent to roughly 33% of private sector (non-government) employment both directly (those who work in LSOs) or indirectly through businesses that exist due to LSOs activities

Research & Development R&D

LSOs have the financial capacity and incentive to invest heavily in innovation and invention to gain a competitive advantage. Smaller companies may later copy these innovations leading to overall increased efficiency. LSOs spend approximately $8+ billion per annum on R&D


Stimulate Infrastructure Growth

LSOs force governments to invest in the provision of essential services that allow for the expansion of commerce and industry in such areas as roads, railways, water, power, education, health and telecommunications (especially when LSOs locate in regional areas of Australia)

This growth in infrastructure can also be utilised by smaller businesses and society as a whole


Export Income

LSOs look to export their products to overseas markets, thus generating export income for the Australian economy and improving Australias Balance of trade (Exports Imports)

One fifth of the revenue of LSOs comes from exporting goods and services overseas. (Income received when other countries buy our goods & services)


Industrial base (variety of goods & services)

LSOs increase and make a large contribution to the range of products and services produced and available in Australia as well as exported we have a more DIVERSIFIED economy because of LSOs

Training and Skills Development

LSOs provide ongoing training and skill development to employees thus increasing the skill base and productivity of the Australian labour force Smaller businesses may also benefit by employing these former LSO skilled workers if they change jobs to a smaller business

LSOs- Negative Contributions

Although they make enormous contributions to the nation, there are some negative impacts that LSOs have including:

DownsizingOutsourcing work Moving operations overseasAnti-Competitive PracticeEnvironmental damagePerceived lack of community goodwill


Downsizing resulting in unemployment

Downsizing is restructuring the organisation resulting in a reduction in staff numbers in order to cut costs and improve efficiencies and profits

As LSOs look to become more efficient and increase productivity, they often look to reduce their employee numbers. As a result, staff redundancies are commonplace in LSOs


Outsourcing results in unemployment

Outsourcing is the transferral of non-core business activities to an external organisation. Examples include telephone customer service, legal and accounting services, IT services, cleaning, maintenance of equipment

LSOs look to improve efficiency by having specialists deal with areas of their business that are not their core activities in order to reduce costs and increase the quality of the service.

This often results in further staff redundancieseg customer service to Asia


Anti-Competitive Practice

May practise bullying behaviour by destroying smaller competitors in their market through undercutting prices or buying them out

LSOs in the same industry may practise collusion by fixing prices in agreement with each other until such time as smaller businesses can no longer compete and there is little or no competition


Environmental damage

LSOs are often responsible for much of the environmental damage we see on the planet through pollution, poor waste management, environmental accidents and excessive emission of greenhouse gases.

This often results in large economic costs to clean up the damage and makes resources unusable for future generations.


Perceived lack of community spirit

At times LSOs are perceived as being too big and heartless, treating consumers and employees poorly

Import a lot of their materials requirements from overseas rather than buying from Australian suppliers

Possibly argued that they dont contribute / donate enough of their profits to community projects

*Key knowledge:

Internal and external (operating and macro) environments of large-scale organisations

(Section 1.6 in textbook)


The environments of LSOs

Internal EnvironmentFactors within the organisation that the organisation has control overExternal Environment

Factors outside the organisation that the organisation has some or little control over. Made up of 2 environments:Macro EnvironmentBroader factors in society in which the organisation operates very little or no controlOperating EnvironmentOutside factors which the organisation interacts with in conducting business on a day to day basis some control *

The Internal Environment of LSOs

*The environment within the organisation itself.

Within this environment a business has a high degree of control or influence:

Managers (Number of levels and positions)Employees (their tasks and responsibilities)Organisational rules, policies & proceduresCorporate culture (shared values and beliefs)Structure of the organisation (departments)What & how the organisation produces its goods and services and markets its product(s)

The External Environment of LSOs

*Factors from outside the organisation that impact on business performance.

The organisation has at times some control, little or no control over these factors.

External factors are further broken down into the

Operating environmentMacro environment

The Operating Environment of LSOs

*Those factors which the organisation interacts with in conducting business often on a day to day basis

The organisation may have some control over these factors.

Sometimes these external parties can affect change within the organisation

Suppliers Customers Unions Competitors Banks Protest & Lobby groups

SuppliersUnions & lobby groupsCustomersCreditorsCompetitors

The Macro Environment of LSOs

*Those broader factors in society in which the organisation operates

The organisation has no control over these factors

These factors could either negatively threaten or cause positive changes within the organisation

Examples include:

Social and Demographic factors

ageing of the population changing of society attitudes to issues (environment ?) birth rates and migration (population growth)


*Technological Developments

Invention and improvement of technology in the way goods are produced and how communication takes place

State of the economy (Domestic and Global)

Boom high levels of employment, consumer spending and production is high

Recession high unemployment, low consumer spending and production by business is low

Legal and Political Issues (laws & changes of Government)

Governments create and can change laws and different governments have different policies they would like to implement. E.g. carbon tax, GST


*Education standards and training facilities

Affects skill levels of job seekers and thus potential employees for organisations, as well as the availability of people with certain skills that the LSO needs

Increased globalisation and trade between countries

Cheaper imports coming into Australia (negative aspect of globalisation) vs. New markets for Australian businesses (positive aspect of globalisation)

Key knowledge:Performance indicators used to evaluate the performance of large-scale organisations, including:

the percentage of market share, net profit figures, the rate of productivity growth, the number of sales, results of a staff and/or customer satisfaction survey, the level of staff turnover, level of wastage, number of customer complaints and number of workplace accidents

(Section 1.7 & 1.8 in textbook)

*Performance Indicators

Percentage of Market ShareNet Profit Rate of Productivity Growth Number of SalesStaff/Customer Satisfaction Level of Staff TurnoverLevel of WasteNumber of Customer Complaints Number of Workplace Accidents


Performance Indicators (PIs)

*Specific criteria used to measure the efficiency and effectiveness of the organisations performance.

Efficiency - how well the organisation using its resources (human / capital / natural) to produce its output (productivity) **aim to increase output without increasing resources (inputs) or maintain output levels with less resources (inputs) used

Effectiveness - how well is the business achieving its objectives/goals

Mission/Vision Statement More specific corporate goalsDepartment GoalsIndividual employee goals

Efficiency (Productivity)The levels of output (goods and services produced) from a given amount of inputs (resources)Current situationInputsOutputs$100000 to create10 carsIncreases in productivity / efficiency$100000to create15 cars$90000to create10 carsDecreases in productivity / efficiency ?$100000to create____cars$_______to create10 cars

Key Performance Indicators (KPIs)

*Provide relevant and measurable data to evaluate a business performance.

KPIs need to be measurable, reliable (accurate), and comparable between periods of time within the business and with other businesses.

Qualitative KPIs KPIs based on opinion or personal feedback / responses which are often subjective in nature (e.g. Employee or customer feedback from surveys)

Quantitative KPIs Based on numerical data and can be expressed in a numeric format. Objective in nature.


*Percentage of Market Share

The proportion of company sales (or customers) compared to total industry sales (or customers) expressed as a percentage


*Net Profit figures

Profitability measures the earning potential of an organisation by looking at the revenue from sales and subtracting the costs of production

From this, the amount of company taxes is then subtracted to obtain a final profit figure.

Net Profit = (Revenue Expenses) - Tax


*Rate of Productivity Growth

Productivity measures the amount of output produced from a given number of inputs (resources such as e.g. materials, time , labour)

If the rate of productivity improves from one year to the next, then the business is generally performing well

E.g. 2million cars produced (outputs) in 6 months (input).If in the next 6 months we create 2.5 million cars in 6 months our Productivity, and therefore efficiency has improved by 25%


*Number of Sales (Volume of sales)

This is the number of units of a particular product sold in a given period of time

If the number increases, generally, the business would be performing better


*Staff/Customer Satisfaction

The level of staff or customer satisfaction can be obtained by way of a survey.

For customers, it is the degree to which they are happy with the products and the level or service offered by the company.

For staff, it is the degree to which they are happy with the work, their environment and level of pay.

If the level of satisfaction is increasing, the company would be performing better


*Level of Staff Turnover

Staff turnover is the number of employees who are leaving an organisation and is used as an indicator of staff satisfaction.

If staff turnover is high it generally indicates that motivation levels are low amongst employees and there may be issues that need to be corrected within the organisation.


*Level of Waste

This is a measure of how efficiently the company uses its resources

Many resources are under-utilised or left over at the end of the production process. This is known as waste

By reducing waste, organisations would reduce production costs, reduce the costs of disposal and the impact on the environment


*Number of Customer Complaints

This is a measure of customer satisfaction with the products and level of service.

It is important to realise that for every customer who complains, there are many more who dont.

As this number is reduced, it is a sign that customers are becoming happier with the quality of the companys output.


*Number of Workplace Accidents

This is a measurement of safety in the workplace

Workplace accidents are not only bad for those involved and diminish a companys reputation, but they also halt production and cost the company money

By decreasing the number of accidents through providing a safe and healthy workplace, businesses can increase employee productivity

Performance indicators to assess certain areas in an organisationOperations (Production)

Rate of Productivity growth (inputs vs outputs), Number of times production targets achieved, stock levels, level of wastage in production, number of defective items produced, Number of items produced per hour

Safety

Number of workplace accidents, staff knowledge of OH & S, number of days lost to accidents

Environment

No. of environmental spillages, Money spent on environmental improvements and community programs, amount of green house emissions

Performance indicators to assess certain areas in an organisationFinancial Performance

Number of Sales (volume), Sales $ levels, Expense $ levels, Net Profit $,

Human Resources (HR) management

Training days per employee p.a, $ spent on training, % of vacancies filled, level of employee absenteeism, length of service of staff, level of staff diversity, Number of industrial disputes, Results of staff satisfaction surveys, level of staff turnover (resignations)

Marketing

% of market share, Number of sales (volume), Sales $ levels, results of customer satisfaction surveys, Number of customer complaints

Key Terms linked to performance indicators

*Benchmarking

Measuring organisations performance against that of the industry leader, which may be an organisation in Australia or overseas, that is well known for its excellence.

Best PracticeUsing the most efficient and effective techniques in all management functions / departments to achieve the industry benchmark

Key Knowledge:

Identification and characteristics of stakeholders of large-scale organisations, including their interests, possible conflicts and related ethical and socially responsible considerations.


Who or what are Stakeholders?

*Stakeholders are any individuals, groups or

institutions who

- interact with the organisation or - have a vested interest in the activities, conduct and performance of the organisation

Stakeholders can be internal or external to the

organisation

Best PracticeUsing the most efficient and effective techniques to duplicate the industry benchmark

The Typical Stakeholders of a LSO

* Board of Directors and the CEO Management Employees Owners [shareholders if a corporation]

Customers Suppliers Competitors Unions [represent employees in the LSO] Consumer groups [eg: Choice] Government [Local/State/Federal] Government regulators [ACCC and ASIC] Financial institutions [lenders of money e.g. bank] Local Communities Protest or lobby groups [e.g Greenpeace]

INTERNALEXTERNAL

Conflicts Between Stakeholders Interests

*

At times, the interest of various stakeholders will conflict as they have different expectations of the business

Possible areas of conflict between stakeholders include:

Selling prices charged for products or services The large profits made by organisations CEO and upper management salaries and bonuses Outsourcing of work to other businesses in Aust. and overseas Wages of employees and conditions of their work Overseas Suppliers of LSOs

e.g. sourcing cheaper raw materials vs quality control poor ethical standards countries with poor human rights records etc.

Can you think of any more?

Stakeholder Conflict Activity

*Which stakeholders are likely to have conflicting opinions about the following strategies?

Outsourcing work or moving off-shore Wage rises for workersAn increase in Bank Fees at the ANZNew policies about the use of facebook during work hours

*

Main Stakeholders and their Interests

*Shareholders

People who are partial owners of LSOs through the

purchase of shares

They are generally interested in a solid return on their

investment, so are motivated by profit

This may come at the expense of the company acting in a

socially responsible manner, as this costs money

However many shareholders are now only purchasing

shares in companies that are known to be ethical and socially responsible


*Employees

Interested in fair wages and conditions, a healthy & safe workplace, work-life balance and job security

This can conflict with the interests of other stakeholders such as managers and shareholders, as providing such things can conflict with profitability in the short term

Employees also are increasingly becoming aware of ethical issues and many will now choose not to work for companies who are not ethical or socially responsible



* Customers

They are interested in lower prices, better quality products and high levels of service

Often customers will purchase products from organisations known to be ethically and socially responsible

*


Unions

Unions have the interests of employees at heart and negotiate more favourable pay and conditions on employees behalf

The actions of unions can sometimes conflict with the actions of other stakeholders such as shareholders and management, as the level of profits may be impacted upon by an increase in staff wages

They are interested in companies acting ethically in the way they treat their staff and in their Occupational Health & Safety practices

*


Suppliers

Suppliers provide LSOs with the raw materials used in the companys operations

They wish for the success of the organisation so they can guarantee continuing business

Most organisations realise it is beneficial to deal with ethical and socially responsible suppliers in order to improve delivery times, enhance their own reputation and improve the quality of their own products

*


Community members

Society expects organisations to act ethically and show concern for the community

They are interested in such factors as:

- the level of waste

- amount of greenhouse gas emissions

- the organisations carbon footprint

- whether they are supporting the local community through sponsorships

*


Governments

Are interested in the tax revenue received from company profits so are happy when companies announce large profits.

They also like the contributions companies make to the economy such as to GDP and employment.

However, they too are beginning to realise the importance of organisations acting socially responsible as global warming has a potentially damaging impact on the economy

*

Activity Case Study Chemco

Chemco Pty Ltd is a large industrial chemical manufacturer based in South Australia.

Chemco intends to build a toxic dump waste 10 kilometres from the country town of Woopidoo which as a population of 9000 people, of which 900 are directly employed in this LSO.

The waste dump is designed to comply with very strict environmental standards and according to Chemcos CEO is vital for the long term survival of this manufacturing facility.

It will significantly reduce the costs of transporting waste to a depot 300 kilometres away thus impacting positively on company profits.

*

Activity Case Study Chemco

Which stakeholders would have an interest in this

situation and what would their stance be ?

StakeholderStance

*

Ethics & Social Responsibility (ESR)

Ethics Moral standards and principles that guide behaviour (many businesses have a Code of Ethics or Code of Conduct for employees)

Ethical ManagementProcess of abiding by the developed organisational moral standards and acting in a way that is deemed acceptable to the interests of society as a whole

Social ResponsibilityA general concern for the well-being of society and an awareness of the organisations impact upon society and the environment. Obligations a business has to the well being of its stakeholders, over and above its legal responsibility.

*

Ethics & Socially Responsible Management (ESM)

Triple Bottom Line

In the past, companies would measure their performance by predominantly looking at the financial bottom line. (final net profit figure)

Companies are now expected to measure their performance by taking into account ALSO social and environmental performance as well as their financial performance.

This is known as the Triple (3) Bottom Line

Best PracticeUsing the most efficient and effective techniques to duplicate the industry benchmark

*

Ethics & Socially Responsible Management (ESM)

ESM- Activity

Using the internet, research the ESM policies and activities of 2 Australian LSOs (for your Business Profile)Complete the ESM activity for Woolworths

Chapter 1*Yr. 12 Business managementUnit 3 - Corporate Mgt - AOS 1 Large scale org. in contextChapter 1*Yr. 12 Business managementUnit 3 - Corporate Mgt - AOS 1 Large scale org. in contextChapter 1*Yr. 12 Business managementUnit 3 - Corporate Mgt - AOS 1 Large scale org. in context*Copy & Paste illustration into notesYr. 12 Business managementUnit 3 - Corporate Mgt - AOS 1 Large scale org. in contextChapter 2*Yr. 12 Business managementUnit 3 - Corporate Mgt - AOS 1 Large scale org. in contextChapter 2*Yr. 12 Business managementUnit 3 - Corporate Mgt - AOS 1 Large scale org. in context

2013_slides_bm_unit_3_aos_1__2013.ppt

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