semester two business content

financial incentives: sale bonuses

financial incentives: sale bonuses

• payments in cash if key performance indicators are achieved

  • individual bonuses may undermine team work but this can be addressed by team based incentives

financial incentives: share schemes

• employees are given shares in the business as rewards

  • provide long term motivation as employees can only benefit from growth in share price and dividends if business performance improves over time

financial incentives: pay rises

• linked to performance and management - ongoing pay rise increase is linked to achievement to an individuals performance goals

non-financial incentives: skill improvement training

• giving employees extra training to support their personal career goals can be a win-win result for the employer

non-financial incentives: recognition and award

• publicly acknowledging good performance (through awards such as employee of the month)

• usually in the form of salaries and wages

  • extrinsic (financial benefits) or intrinsic (feeling of satisfaction or job well-done)

non-financial incentives: extra leave (or arrange to work from home)

• exemplary performance

non-financial incentives: penalties for employees

• debatable whether penalties for poor performance are motivating for employees

  • may provide temporary increase in employees efforts, or compliance with the business’s needs

  • tends to lead to more stress and lower morale

    • become disgruntles and only minimally work in order to get by each day

• examples: reducing wages, taking disciplinary action, demoting someone to a lower position, and removing benefits

purpose of employee incentives

• attract and retain staff

• motivate staff to improve

• achieve business goals

• increase sales and profit

maslow’s hierarchy of needs

each person requires the lowest in the hierarchy to be met before moving up to the next level

5. self actualisation: desire to be the most one can be
4. esteem needs: respect, self esteem, recognition, strength and freedom
3. love and belonging (social needs): friends, intimacy, family, sense of connection
2. safety needs: personal security, employment, resource, health, prosperity
1. physiological needs: air, water, food, sleep, clothing, reproduction

hertzberg’s motivation-hygiene (2 factor) theory

• categorised motivation needs into higher level motivational factors (intrinsic) and lower level hygiene factors (extrinsic)

  • motivational factors (intrinsic)

    • factors that increase satisfaction: achievement, recognition, the work itself, responsibility, promotion and growth

  • hygiene factors (extrinsic):

    • factors that increase dissatisfaction: company policy, security, status, pay rate, relationships and physical working conditions
      

• two-step process: must eliminate hygiene factors, then addresses motivation factors

vroom’s expectancy theory

• based on theory that people make conscious choice in order to maximise happiness and minimise pain

  • expectancy: the belief that increased effort will lead to increased performance

    • affected by: resources available, the right skills, necessary support

  • instrumentality: the belief that if performance is increased than a valued outcome will be received

    • affected by: clear understanding of the relationship between performance and outcomes, trust, transparency of the process that decides who gets what outcome

  • valance: the importance that the individual places upon the expected outcome

    • for valance to be positive, the person must prefer attaining the outcome to not attaining it

      • e.g. if someone is mainly motivated by money, he or she might not value offers or additional time off

adam’s equity theory

• employees judge the fairness of a leader based on social comparisons

  • employee will do this by assessing what they give the organisation (inputs) in relation to what the organisation gives them (outcomes) by comparing what rewards are given to their peers

  • fairness is subjective and inequalities - real perceived - harm motivation

    • when inequalities exist - human behaviour seeks to make the situation more equitable

      • which can lead to decrease inputs

leadership style: autocratic

• makes all decisions by themselves → without consulting others in the business

• aim is to benefit the business, not the employees

• set all goals of the business and communicate ‘downwards’ to employees → no feedback occurs back to the leader

• believed in direct supervision of employees (creates distant relationship)

leadership styles: participative/democratic

• involves employees in decision making

• aims to benefit both the business and the personnel

• communication occurs in both directions → from the leader to employees, and back ‘upwards’ to the leader → collaborative and feedback is ongoing and continuous

leadership styles: situational

• many people develop a different leadership style for different situations (and needs of employees)

  • require consideration of their individual people working with the leader, their skills

• leader will often vary their leadership style depending on the decision to be made two main concepts of leadership:

  • managers can adapt their leadership styles depending of the needs of the individual employees

  • manager can adjust their task behaviour and relationship behaviour as required by situation

  • the model depends on : leadership style, maturity of the employee or group

  depending on situation, the leadership styles can be:

  • delegating: permits others to make decision

  • supporting: participative and shares

  • coaching: explains

  • directing: gives instructions and supervise

factors that influence spending patterns of small to medium enterprises: the level of economic activity

high economic activity (boom time):

• low unemployment

• business employ more staff to meet increased demand

• increasing wages

• more choice in goods and services

• businesses compete on service and value

• high levels of consumer spending

• strong business and consumer confidence

leads to: inflationary pressure, increasing interest rates

low economic activity (trough):

• higher unemployment

• business employ less staff to become profitable

• decreasing wages

• less choice in goods and services

• businesses compete in price

• low levels of consumer spending

• poor business and consumer confidence

leads to: deflation, decreasing interest rates

factors that influence spending patterns of small to medium enterprises: prevailing community social norms

business need to position their business to ensure they are taking advantage of their target market

• their public image needs to be reflective of the social values of the time otherwise they risk losing market share to a competitor with a ‘more acceptable image’ - this is social competent

factors that influence spending patterns of consumers: the level of economic activity

high economy (boom time):

• greater spending on luxury goods

• more likely to buy major household items such as ‘brown’ and ‘white goods - these are considered to be durable goods

• consumer are more likely to use debt to fund spending - i.e. credit card, holiday loans

• decreased savings - consumers will spend a greater portion of their income

• consumer wish to increase their standard of living or lifestyle

low level (trough/recession):

• reduced spending on luxury goods

• less likely to purchase durable goods as their purchase can be delayed

• consumers are more likely to pay of debt to protect financial security

• increased savings: consumers will save a greater amount of their income

• the substitution effect: consumers will purchase cheaper alternatives to save money (inferior goods - ‘home brands’)

• businesses will choose cheaper suppliers and reduce hours on casual employees

• consumers will intend to maintain their lifestyle
  

factors that influence the spending patterns of consumers: prevailing community social norms

norms are the rules of a society for behaviour, that are considered acceptable and expected within the standards of the culture

norms also describe the lifestyle choices of people in a community, how they interact and their habits. for a person to be identified as a group or a target market they will conform to a certain norm:

• examples: easter (chocolate gifts, travel and family meals), australia day ( parties and merchandise)

• an aging population

issues related to the marketing and promotion of: alcohol

the alcohol beverages advertising code (ABAC) is a code

• restricts alcohol promotion to 8:30PM to 5AM and 12:00 to 3:00PM

• their are age restrictions for advertising on websites and social media, ads must be limited to those over 18

issues related to the marketing and promotion of: fast food

the advertisement of food to children is covered by an industry of set code of practice

fast food is describes as cheap, accessible, calorie dense food usually with high levels of sodium, fats and sugar

this is relatively ineffective and their are several issues with the advertisement of fast foods

fast food is at political risk of regulation to offset some of the negative social impacts of the food

fast food is linked to poor health and obesity increase

issues related to the marketing and promotion of: tobacco

tobacco is a legal product with extensive negative health consequences

australia has some of the strictest laws, in the word regarding tobacco advertisements

this includes a pain packaging, high tax rate, (average cost is ~$40), health warnings on each package nd no advertising allowed

the concept of intellectual property (IP)

creations of the mind by developing something new and original, protected for exclusive use.

for example:
innovations
trademarks
inventions
industrial designs
images
manufacturing processes

purpose of IP laws in australia:

• gives the business/developer of IP a competitve advantage to make financial gain

• uphold the brand name, and quality of associated with a particular brand

• avoid the market being flooded with cheaper inferior quality fakes

• prevent others making money from the hard work and effort of the investor

• businesses spend large amounts of money on research and development to protect their design ideas

types of intellectual propoerty registrations: patents

a right that is granted for any device, substance, method, or process that is new inventive and useful

• is legally enforceable and gives you (the owner), exclusive rights to a commercially exploit the invention for the life of the patent

• you can apply to have someone stop copying or using your patented item

• in australia a standard patent lasts for 20 years and can be registered in other countries → an innovated patent is for products with a shorter life and only lasts 5 years (quicker to apply and cheaper for to register)

context: a patent will protect a business’s invention from being copied by other people or competitors and will allow the company a competitive advantage in the market for its invention

types of intellectual property registrations: trademarks

a way of identifying a unique product or service

• it is a form of brand protection which distinguishes between your products or services and those belonging to your competitors

• a trademark is not just a logo → it can also include a domain name

  • the domain name is a web address, ensure identity from their competitors

• it can be a letter, number, word, phrase, sound, smell, shape, logo, picture, movement, aspect of packaging, or a combination

• registration life of 10 years and can be renewed

• allows for easy recognition of the product, and is used in all marketing and all products sold (including promotion packaging, labelling on websites and machines)

context: the name of the invention should be a registered trademark, so that others cannot copy that name. It could be used as a brand on all of the business’s products and consumables to show that they are genuine. It is a form of brand protection which distinguishes between the business’s products and those belonging to its competitors. This will protect the identity and brand, making it recognised locally and/or globally and attracting customers.

types of intellectual property registrations: designs

refers to the features of shape, configuration, pattern or ornamentation which gives the product a unique appearance and must be new and distinctive

• registration intended to protect designs which have a commercial use

• gives the owner exclusive rights to commercially use it, licence it or sell it

• aim to protect the visual appearance of the whole product that:

  • has a physical and tangible form

  • is manufactured or handmade

  • is produced on a commercial scale

• 5 years
  
  

context: a business needs to protect the design of their invention so that others do not copy the design. This would give said business the right to commercialisation of their invention and a competitive advantage over other similar inventions.

process of IP registration

1. research

2. application

3. examination

4. publication

5. pay fees

6. registration

concept of product life cycle

refers to the length of time a product is introduced to consumers into the market until it is removed from shelves

• used by management and by marketing professionals as a factor in deciding when it is appropriate to increase advertising, reduce prices, expand to new markets or redesign packaging

• newer more successful products push older ones out of the market

the usefulness of a product life cycle in making a business decision

• help and understand how a product is performing, the stage it is on and the extension strategy is needed

• give information about which products to produce in the future → whether further investment, marketing, promotion is required to increase longevity

• help a business make decisions about pricing, costs, promotion, extension strategies, decisions about their product range and decisions about overall direction of a business

stages of the product lifecycle:

development/introduction: this phase generally includes a substantial investment in advertising and a marketing campaign focussed on making consumers aware of the product and its benefit

growth: if the product is successful, it moves onto this stage → this is characterised by growing demands, and increase in product, and expansion in its availability

saturation/maturity: this is the most profitable stage → the costs of producing and marketing decline

decline: a product takes on increased competition as other companies emulate its success → sometimes with enhancements or lower prices - product may loose market share and begin its decline

extension strategies:

• an extension strategy is usually introduced between the maturity and saturation stages of the product life cycle, before a real decline takes place

• aim: to continue to maintain a steady rate of revenue from a product

repositioning of the product: exploring new markets for a product (e.g. different sized ver.) (value adding)

increasing marketing activity: running new advertising campaigns and sales promotions can attract new customers + reminds and encourages existing customers to purchase

product differentiation: making a product stand out from it’s competitors - by highlighting the differences (ensuring product has a unique selling point)

reducing price and rebranding of the product

influence of government on: product labelling

main issues:

• health and saftey information

• genetically modified food

• country of origin

labels provide:

• the country the products came from

• food information

• product measurements

• the business's name and address

• environmental performance (for example a washing machine's water efficiency rating)

• safety information

• trade descriptions (for imported or exported products).

Consumer ACT (2010): sets rules for product labelling and prohibits businesses from making false or misleading claims about the place of origin of products.

• Mandatory consumer product information

• Industry specific regulations

• Customs information which is required for some imported products

influence of government on: trading hours

state governments set trading hours and cover retail → attempt to balance the desire for business to maximise sales and the impact of employees and their families

• certain trading hours set:

  • 8.00am to 9.00pm on Monday, Tuesday, Wednesday Thursday and Friday

  • 8.00am to 5.00pm on Saturday

  • 11.00am to 5.00pm on Sunday

  • 11.00am to 5.00pm on public holidays

  • CLOSED on ANZAC day, Christmas Day and Good Friday

• business face additional costs for opening longer - staff wages, cleaning, electricity

influence of government on: advertising to children

Children’s Television Standards (CTS) classify television programming as (C - children) or (P - preschool)
advertisement directed to children must meet requirements set out in the CTS:

• who is the ad directed to

• nature of the product/service

• themes

• whether or not it is told from a child’s perspective

• storyline of the ad

• visuals

• language

what is prohibited:

• be misleading or deceptive towards children

• include words like ‘only’ or ‘just’ when communicating the price of your goods, services or facilities

• include sexual images or imply that using your goods, services or facilities will enhance a child’s sexuality

• portray images that may unduly frighten or distress children

• be for, or relate in any way to, alcohol products or companies that supply alcohol products

• promote unhealthy eating and drinking habits (see also the AANA food and beverages advertising code)
  
  

employee protections provided by the Fair Work Act (2009)

• workplace rights

• the right to engage in industrial activities

• the right to be free from unlawful discrimination

• the right to be free from undue influence or pressure in negotiating individual arrangements.

intent and purpose of Work Health and Safety Act 2020 WA

responsibility of an employer within the Work Health and Safety Act 2020 (WA)

• do not expose employees to hazards in the workplace

• provide information, instruction, training and supervision to maintain safe work practices

• cooperate with safety and health inspectors

• provide protective clothing and equipment (PPE)

responsibility of an employee within the Work Health and Safety Act 2020 (WA)

• take reasonable care for their own safety and health at work and to avoid harming the safety of other people

• employees must follow the safety and health instructions given by their employer

• employees must report all workplace injuries and hazards

• employees must use protective clothing ad equipment as instructed when required

purpose and intent of a business plan:

financial reports: budget (e.g. cash flow statement)

Feature – a forecast of the financial position and performance of the business (used to plan, monitor and control business operations)

Purpose – serves as a plan of action for achieving quantified objectives, a standard for measuring performance (measured against actuals to monitor performance and control any evident problems)

cash flow statement (CFS)

• cash flow or (liquidity) of a business is assessed by CFS

• measures how well a company generates cash to pay its debt obligations, fund its operating expenses and fund investment

• LIQUIDITY: The ability of a business to repay short term debts on the date they fall due

financial reports: profit and loss statement (income statement)

Feature – Shows Operating and Non-Operating Income and Expenses and Profit or Loss. Used primarily to help a business to calculate how much net profit it has made over a period of time.

Purpose – to show the financial performance of the business for a period of time, usually 12 months. Determine the total income less total expenses to see whether the business is profitable.

• the financial performance (or profitability) is assessed by a income statement

• PROFITABILITY: The ability of a business to earn income from its investment in assets and equity
  

financial reports: balance sheet

Feature – a financial statement that sets out a business’s assets, liabilities and equity at a specific point in time

Purpose – to asses a firm’s liquidity and stability, to provide an idea of a company's financial position. It does so by outlining the total assets that a company owns and any amounts that it owes to lenders or banks, for example, as well as the amount of equity. Shows the Financial Stability and financial position of the business.

• the financial position (or stability) of a business is assessed by the balance sheet

• provides an overview of assets, liabilities, and stockholder’s equity as a snapshot in time
  
  Assets = Liabilities + Owner’s Equity

  Owner’s Equity = Assets - Liabilities

  Liabilities = Assets – Equity

financial indicators

profitability - income/profit and loss statement - to measure profitability. The ability for the business to sell things for more than they buy it for. The statement will highlight areas that increase profitability and areas that need to be reduced to be more profitable.

sales - total sales revenue; steady increase in sales each month or over the year. Sales increase or decrease will indicate a possible fall in profitability and can be used to change marketing - pricing or products. This business will need to look at where or how to increase sales or increase prices if sales decrease. Marketing to increase sales: loyalty cards.

cost reduction - the costs of goods sold, and selling expenses, administration expenses, financial expenses. gives an overview of all expenses a business can be used to check where costs can be decreased to increase profit. such as: change suppliers to reduce costs; process improvements that result in cost reductions

non financial indicators

quality - indicates competitiveness of a business and whether it meets industry and customer standards (use highest quality ingredients, increase number of sales etc)

customer satisfaction - a positive customer satisfaction relates to increase or steady sales figures/repeat business. Repeat customers lead to an increase in number of sales, positive reviews from customers and few or low complaints.

function of KPI

Where a business sets business goals and works towards achieving them (may be set in relation to operations quality, customer satisfaction etc). Allows the business to determine progress towards these goals and to measure their success, and should be directly related to the business’s goals.

current asset

cash or other assets that will be consumed or converted in 12 months or less

• GST Credits

• Accounts Receivable (or debtors)

• Stationery Supplies

• Cash at bank

• Inventory

• Prepaid rent

• Prepaid Insurance

non-current asset

Assets other than cash, that will be used by a business for more than 12 months

• Long Term investments such as shares

• Motor Vehicles

• Office Equipment and Furniture

• Land and Buildings

current liability

liabilities that will be settled in 12 months or less

• Accounts Payable (or creditors)

• Bank Overdraft

• Accrued expenses (such as wages owing to employees or amounts owing on utilities, etc)

• A loan repayable within 12 months

non-current liability

liabilities that will be settled in more than 12 months

• Long-term loan (ie. repayable in 10 years)

• Mortgage

profitability ratio

gross profit, profit → if higher it means increased profit over the year

liquidity ratio

current → how easily assets can be converted into cash, the ability of a business to pay its short-term debts (specifically those being those debts that are payable in 12 months or less) using its current assets.

stability ratio

debt to equity