Introduction to Large Scale Organisations Year 12 Business Management

Expectations Come prepared – organisation is key Respect each other. Work hard – good results come from effort. Honesty – ask questions if you don’t understand. Believe in yourself – if you don’t, who will? Participate – attend every class and do the work. Bring your textbook, pens, exercise book/folder

Key Information Ms Pham Office hours: Wednesday & Friday, A Team Email: pham.thao.t@edumail.vic.gov.au Class wikispace:

Unit 3 AOS 1 Study Design On completion of this unit of work you should be able to discuss and analyse the context in which large scale organisations operate. The context which contributes to unique nature of LSOs. Characteristics of LSOs. Variations of types of LSOs, their objectives and related business strategies. Typical management functions in LSOs including operations, finance, human resources, marketing and research & development. Contributions of LSOs (positive and negative) to economy. Internal and external environments of LSOs. KPIs used to evaluate LSOs including percentage of market share, net profit figures, productivity growth, number of sales, staff/customer satisfaction surveys, staff turnover, wastage, customer complaints and workplace incidents. Stakeholders in LSOs, their interests, possible conflicts. Ethics and social responsibility.

Learning Intentions Define relevant terms from Chapter 1. Describe the characteristics and types of LSOs, the environments they operate in and their contributions to the economy. Identify and explain the core management functions of LSOs. Identify the main stakeholders in/around businesses. Identify and describe the main key performance indicators businesses can use to measure performance. Begin preparing for Unit 3 SAC 1.

Organisation GLOSSARY: Organisation - An organisation is a system that enables people or groups of people to work together in a planned and coordinated way to achieve common goals and objectives. Organisations combine physical, human, technological and financial resources and process them to create a product or service. Managers are used to plan, organise, lead and control the activities of organisations in order to help the organisation achieve its objectives.

Large-scale Organisation GLOSSARY: Large-scale organisation (LSO) - An enterprise that employs 200 or more people, has more than $200mil in total assets, has income/revenue in the billions of dollars, makes profits in the millions of dollars, and operates across a large scale (i.e. more than one country). 200 + employees > $200mil in total assets $bn’s in income/revenue $mn’s in annual profit Large scale operations

Types of LSOs Remember back to Unit 1 Business Management. You learned about the types of organisations that exist. Corporations (companies) Government Business Enterprises Government Departments Charities Foundations

Corporations (Company) GLOSSARY: Company - A corporation (company) is a business with the objective of marking a profit. Companies can be privately owned by up to 50 private owners, or publicly listed on the Australian Stock Exchange (i.e. owned by shareholders).

Government Business Enterprises GLOSSARY: GBE - A corporation owned by the Government and shareholders. Its main objective is to provide a service or product to the public and make a profit in doing so (e.g. Australia Post, Vic Roads).

Government Department GLOSSARY: Government Department - An organisation for which the government is responsible. Its main objective is to provide a service to the community in order to satisfy social or political objectives (e.g. Centrelink, Australian Tax Office). Government departments are the responsibility of a minister and public servants (for example, education).

Charities GLOSSARY: Charity - An organisation that exists to provide assistance in the form of goods, services or finances to disadvantaged or marginalised groups in society. Charities help alleviate (overcome/reduce) social problems for the benefit of the broader community (e.g. World Vision, Salvation Army)

Foundations GLOSSARY: Foundation: An organisation that exists to further a particular cause. Foundations are usually involved in research, education or promotion of a particular cause and play an important role in raising and distributing finances related to that cause (e.g. Heart Foundation, Butterfly Foundation).

Industry Classifications All organisations are classified according to the industry sector in which they belong – usually based on the area of production in which the organisation operates. Primary: Businesses that extract raw materials/resources directly from nature (e.g. mining – BHP). Secondary: Businesses that transform raw materials into finished or intermediate goods (e.g. manufacturing – car manufacturing – Ford).

Industry Classifications Tertiary: Businesses that provide services, particularly the sale and distribution of finished goods. Also includes Government-owned/run organisations. Examples: retail – Big W, education – Copperfield College. Quaternary: Businesses involved in the provision of information and communication (e.g. banking/finance – Commonwealth Bank). Quinary: Businesses involved in the provision of personal/domestic and hospitality services (e.g. McDonalds, tattooist, cleaners, Hoyts, Libraries, Hilton Hotel).

Management Functions Given the size/scale of operations of large organisations, managers are required to plan and coordinate resources and activities to help it achieve set goals and objectives. Resources within LSOs include: Land/physical resources: plant, equipment, raw materials. Labour/human resources: employees of the business. Capital or financial resources: $$$$ Knowledge or information resources These four different resources need to be managed expertly. Therefore, most LSOs are structured into functions which are responsible for the effective management of specific resources.

Management Functions Operations Management Function: Deals with the day-to-day core activities of the business and is responsible mostly for land/physical resources. Human Resource Management Function: Deals with the management of people within the organisation and is responsible for labour/human and knowledge resources. Financial Management and Administration Function: Deals with accounting, financial and all administrative support services and is responsible for capital/financial and information resources. Information Technology Function: Deals with information and communications management and is responsible for knowledge or information resources. Marketing or Sales Management Function: Deals with the promotion of the organisation and its products.

Management Functions

Contribution of LSOs to the Economy LSOs make a significant contribution (both positive and negative) to the Australian economy. Positive contributions: Provision of employment/availability of more jobs Increased consumer demand/spending, which leads to increased Gross Domestic Product (GDP) Economies of scale, more efficient production and therefore lower costs of products Research, development and innovation Export earnings and foreign income

Breaking down the terms Gross Domestic Product (GDP) refers to the total value of finished goods and services produced and sold within a country. The more produced, the higher GDP is, the ‘healthier’ our economy is. Economies of scale (EoS) refers to a reduction in the cost of production per unit of output as production volume increases (i.e. costs fall as you make more – E.G. Model T Ford). Innovation refers to doing things in new and better ways and developing clever solutions to problems. Many innovations (e.g. iPhone and 3G technologies) come from LSOs. Exports refer to the sale of one goods/services produced within the country to another country overseas.

Contribution of LSOs to the Economy Negative contributions: Damage to environment (e.g. BHP mining for coal). Global warming due to carbon/methane emissions from production. Competition too demanding for small businesses which may fold/cease to exist. Monopoly effect (increased prices) in certain industries due to small number of large competitors (e.g. mining – Rio Tinto and BHP) and price setting. Earnings taken offshore never to be seen again, as many LSOs are foreign owned businesses (e.g. Toyota)

Operating Environments of LSOs Managers need to understand the environments in which their business operates in order to manage any future business opportunities or threats. You might recall from Unit 1 Business Management that there are three environments that influence the operations and success of a business: Internal Environment Operating Environment Macro Environment

Internal Environment GLOSSARY: Internal Environment – Consists of people (employees, managers, owners), culture, policies, processes and resources such as buildings and facilities. Management has the most control over this environment.

Operating Environment GLOSSARY: Macro Environment – Consists of factors external to the business that are likely to have a direct impact on the operation of the business. Factors include: Customers Creditors (lenders, e.g. Bank) Suppliers Competitors

Macro Environment GLOSSARY: Macro Environment – Consists of factors external to the organisation that are likely to have an indirect impact on the operation of the business. Changes in this environment impact on more than one business, and managers have no control over this environment Factors include: Social Legal Economic/Environment Political Technological International

Stakeholders in LSOs GLOSSARY: Stakeholder – Individuals, groups or entities which have a vested interest or stake in how a business operates. E E I E I I E I E E E I

Stakeholders Interests and Conflict Different stakeholders have different interests. Although all stakeholders have interdependence with a business, they have objectives of their own that may differ from the business. The number one objective for most companies is profit for owners and shareholders. However, this may be in conflict with employees, who may wish to seek higher wages and fair/safe working conditions, which are expensive. Consumers may demand companies give back to the community and treat the environment in a friendly manner – again this can present increased costs!

Stakeholders Interests and Conflict Some argue that wages/conditions and social responsibilities do not have to reduce profits - happy workers are more productive, and social responsibility/socially responsible behaviour* can go hand-in-hand with profit (see The Body Shop example). *GLOSSARY: Social responsibility – The notion that a business should operate in ways that fit in with community standards and contribute to the welfare of the community and environment as a whole. * GLOSSARY: Socially responsible behaviour – creating a better quality of life for the greater common good or the most benefit and least harm for all stakeholders.

Vision and Mission Statements All organisations exist to achieve specific aims or goals. Thse are developed from the organisation’s vision and mission statements. GLOSSARY: Vision statement – A broad and inspirational statement which is forward-thinking and describes the company’s dreams for the future. GLOSSARY: Mission statement – A written statement that sets out who the organisation is, what it exists for and how it will achieve its objectives.

Objectives of LSOs The goals and objectives of an organisation are developed from its vision/mission and form part of its strategic hierarchy.

Key Performance Indicators GLOSSARY: Key Performance Indicators (KPIs) – Specific criteria used to measure or evaluate the effectiveness and efficiency of a business’ operations. They include both quantitative and qualitative measures. GLOSSARY: Financial indicators – Performance indicators based on the organisation’s financial statements. These include profitability, return on investment and growth in share price. GLOSSARY: Non-financial indicators – Performance indicators that cannot be expressed in dollar terms and that reflect the non-financial area of business performance. These include the level of customer satisfaction, employee turnover, product quality or level of innovation.

Key Performance Indicators Financial/Quantitative Indicators Non-financial/Qualitative Indicators Efficiency – how well a business uses its resources (time, money, equipment, labour) in order to achieve objectives. Employee satisfaction – how happy, safe and motivated employees are is an indicator of business performance. Productivity – how well a business transforms inputs (e.g. materials) into outputs/finished products. Customer satisfaction – happy customers are generally ‘repeat customers’ and have a huge impact on financial indicators. Profit – revenue from sales minus costs/expenses incurred. Staff turnover – rate at which employees join and leave the business. Return on investment – any interest or dividends returned to shareholders. Customer complaints/returns – amount of customer concerns about product/service. Share price – value of the company’s shares on the stock exchange. Staff Absenteeism – the absence of employees from work, usually expressed as a percentage of days missed. Percentage of market share – The proportion of total sales made by the organisaton compared to competitors. Job safety – how safe the business is for employees, customers and other stakeholders.