Business Organisation and Management

1. Business Organisation and Management The Nature of Business Year Eleven – Semester one - Unit one

2. Roles of Business • Production • Employment • Careers • Enterprise • Investment

3. Production • Production is the process of manufacturing a product or providing a service • Organisations attempt to do this in a way that maximises profits. • Economies of scale refers to lower costs per unit of output as a result of operating on a larger scale. Producing a lot of units results in lower production costs. Why do you think large organisations have an advantage in maximising economies of scale? • How can a small record label gain some economies of scale?

4. Direct financial benefits of economies of scale • Business capacity to save money • Lower costs of advertising • Lower cost of transport • Lower unit price of material inputs (bulk buying) • Lower unit cost of energy inputs • Lower cost of finance

5. Other economies of scale can be found in: • Production methods (specialised production teams) • Equipment and technology • Product promotion • Management techniques • Environmental gains • Research and development • recruitment of staff • preferential treatment by suppliers and government

6. Task One • In groups brainstorm different ways from the previous lists that economies of scale can be achieved for the following: • A large record company like Sony BMG • A large festival like Big Day Out • A large radio network like Austereo • Share your group’s examples with the rest of the class

7. Employment • Is it the responsibility of business to ensure they employ as many people as possible to assist in lowering the unemployment rate? • If you agree with the statement move to the front of the room. If you disagree move the the rear of the room. • One choice of response is no more correct than the other but be prepared to suggest, discuss, listen, learn, respond, and, if necessary, defend your choice.

8. By providing employment opportunities both small and large businesses contribute to Australia’s economic prosperity. Small businesses are usually defined as having 20 employees or less. Small business account for at least 90% of private sector employment. • Large organisations provide many employment opportunities both directly and indirectly. There has been concern of late that large businesses are reducing or downsizing their workforces. Downsizing is often achieved by outsourcing many of their activities to independent contractors. • Many record companies have downsized their staff in response to the reduction in music sales. Discuss the impact of this situation on the production of music in the future.

9. Task Two • Why do organisations outsource work that is not core business? How is this relevant to the music industry? List opportunities that may exist in the music industry for independent contractors to fulfill the outsourcing role. • Why is downsizing a concern in our society and the music industry? • What evidence is there of downsizing in the music industry? • What impact does it have on the role of business in society?

10. Careers • In pairs discuss the term “Career Path.” Is there a need for workers to have a career path? Why/why not? • What’s the difference, Career Opportunities or Just a Job? • What benefits does a business achieve by having staff remain at the business for a long time. • Employer of Choice (EOC) is a classification that businesses can achieve. Investigate this concept and produce a PowerPoint slide that demonstrates your understanding of EOC.

11. Enterprise • The business environment provides many opportunities for enterprising people with business foresight, initiative and originality to invest. This concept is known as Entrepreneurship and is discussed further in Unit 2. • What opportunities currently exist in the music industry for entrepreneurs?

12. Investment • Australians have the choice to invest financially in innovative business ideas and concepts. However for business to operate efficiently and competitively they need to invest in their own infrastructure including staff, equipment and technology. Other utilities are also necessary such as transport and communication systems, electricity, gas and water supplies, waste remove and sanitation. Essentially it is the government (federal, state and/or local) that plans and provides most of these facilities.

13. The Government’s Role in Investment • Large business is significantly important to the Australian economy and governments at all levels often consult industry sectors when planning infrastructure growth. In fact, supporting the corporate sector is increasingly seen as a responsibility of government. For example the Queensland Government actively supports and encourages business to stay in, set-up or relocate their operations to Queensland. This can be done through tax incentives, promises of certain facilities and funding grants. The establishment of Virgin Blue Airlines headquarters in Brisbane is an example of this government support.

14. Task Three • Research the Virgin Blue Airlines establishment and present a dot-point report on what incentives the Queensland Government provided to ensure they established their headquarters in Brisbane. • Investigate local, state and federal grants that exist to help music industry businesses get a start or maintain their businesses. Report on your findings.

15. The Economic System • Australia has a ‘free enterprise economy’, one where businesses regulate themselves in a competitive marketplace with minimum government intervention and regulation. These businesses produce goods or services in order to provide the needs of customers. Therefore business owners are free to operate and grow their business within the Australian economy provided that laws and regulations are adhered to. In this situation many businesses flourish while others are unable to survive.

16. Task Four • Consider the impact that digital downloads (both paid and unpaid) have had on the music industry. • Which businesses are struggling the most because of this situation? • What other businesses have managed to grow and prosper in response to this situation? • What conclusions can you draw?

17. Stakeholder interests • Discuss what you think is meant by the term Stakeholder. • Groups in society (known as stakeholders) have an interest (stake) in the performance and activities of business because it has an impact on them. • Using the Brisbane Broncos as an example brainstorm a list of stakeholders (individuals & groups who have an interest) that the Broncos have.

18. Main stakeholders include... • Owners/shareholders – A business is the property of its owners. Owners receive profit generated by the business (or suffer a loss), and clearly have a significant stake in its performance. The owners of large organisations in the private sector are usually shareholders who are looking for dividends (income) and a rising share price (profit).

19. Shareholders cont... • Managers – Employed to direct (manage) the business on behalf of the owners. Managers do not normally receive a share of the profits and business. Instead they are paid a salary in return for their work. Some may benefit from bonus and profit sharing or packages linked to the performance of the business. • Investors/lenders – Whether small of large business owners can raise funds through external investors – individuals, financial institutions or other businesses. Outside investors therefore have a stake in the company’s performance.

20. Stakeholders cont... • Employees – Staff have a stake in organisational performance, including the businesses' profitability. The work environment, opportunities and job security are all dependent on business viability. Due to the link between profitability and employment levels the trade union movement also shares the interest of employees & employers in terms of organisationaal performance. • Suppliers – Businesses buy inputs from other suppliers. The suppliers of these inputs have a financial stake in an ongoing flow of orders and reliable payment from the buyer.

21. Stakeholders cont... • Customers – purchase goods and services from businesses. Customers may be individual or organisations, Customers have a stake in performance that delivers products of acceptable price & quality for their purposes. • Government – recognises that the country’s standard of living is closely tied to business performance. Successful businesses not only provide jobs & generate wealth, they also contribute to the government’s taxation revenue.

22. Stakeholders cont... • Local community – organisations provide employment & training; supply goods and services that might otherwise be difficult to obtain; and are often part of community life (e.g. sponsorship of local, social or sporting teams). Large organisations can also positively or negatively impact on the natural environment (Maleny Woolworths battle 2005-06) • International community – is increasingly seen as a stakeholder in business activities and the social responsibility of large organisations. It has a stake in large organisations behaving as good ‘global corporate citizens’ and will, when necessary, express concerns about questionable transnational corporation activities including those related to pricing, climate change, natural resource usage & employment practices (sweat shops).

23. Task Five • Complete the following questions from the activities listed on page 11 of the textbook. • Questions 1, 2, and 4 • Be prepared to share you answers with the class.

24. Business goals • Most businesses have two general goals: • to make a profit; • to provide some community need or want. • These goals are communicated in an organisation’s mission, values and vision statement with management and employees developing strategies to ensure the goals are achieved. • Figure 1.5 on page 12 of the textbook illustrates the relationship between objectives & strategy. The company’s objectives are converted into strategies which then impact on activity within the organisation.

25. Mission, vision & values • A mission statement aims to capture, simply, what the business does and how the business works. It gives a clear sense of purpose and may be accompanied by a list of the business’s values. The mission, vison and values form key components of the business plan. • Write a mission statement for Music Industry College. • Share your response with the class.

26. Mission, vision & values • An entire organisation and all of its stakeholders should be aware of the mission & vision statements as well as the values of the organisation. • Brainstorm – How could Music Industry College communicate its mission, vision and values with its stakeholder community?

27. Spitfire Music Publishing • Mission Statement : Spitfire Music’s mission is to strategically place them in the global marketplace where their unique, lyrically powerful and guitar driven songs are able to reach as wide an audience as possible. • How simple and effective is this statement? • Who are the stakeholders at Spitfire Music Publishing?

28. Text Books • In class read through pages 13 – 16 • Do not do the activities. • Discuss what you have read with the class – teacher directed.

29. Task Six • Research local record label Dew Process • www.dew-process.com • Identify the company’s values. • Does the company have a slogan/mission statement? • Suggest ways that Dew Process could communicate its values, mission and vision to its customers and employees.

30. Task Seven • Complete Activity 4 on pages 19,20 & 21 of the text book. • Present your answers in written form. • Answers are to be completed and handed in on the 18th of February.

31. Effectiveness & Efficiency • Performance of an organisation can be seen as consisting of two dimensions: effectiveness & efficiency. • While the two terms are closely related in business practice they are quite different in practice. • Effectiveness refers to an organisation’s ability to formulate and achieve objectives or outcomes. • Efficiency refers to the use of resources in achieving objectives. An organisation is efficient to the extent that it achieves its objectives at the lowest possible cost. • Refer to Figure 1.7 in the text book

32. Performance Indicators • Performance indicators provide more precise and measurable data to evaluate performance and improvement. Often referred to as Key Performance Indicators or KPIs. • In the performance area of quality a business might collect data on percentage of rejects, percentage of rework and percentage of waste. • KPIs can also be use for benchmarking a process where a business compares its own work to other similar businesses. • See table 1.2 on page 23 of your text books

33. Profit • Profit is the amount of money that remains after all costs are deducted from the revenue (income) of the business. • Profit allows the owners/investors of a business to get a financial reward for their risk, innovation & efforts. • Profit is not the only part of business activity. Some businesses have a strong commitment to the following: the welfare of the local community; providing rewarding work opportunities for the employees; and protecting & maintaining the environment.

34. Not-for-profit • Some organisations do not aim to make a profit. These are commonly known as not-for-profit organisations. • These organisations undertake activities just like business (planning, marketing) but are motivated to provide goods and services as effectively and efficiently as possible on a not-for-profit basis. • Starving Kids is a not-for-profit company. What is the major reason that SK operates? Is any part of SK designed to generate a profit? If so what happens to that profit?

35. Social Responsibility • Discuss the following: • Social responsibility • Ethics • Integrity • Code of ethics • How do they apply to the world of business? • Define each term in 8 words or less.

36. Ethics • Ethics are the moral standards & principles that guide people’s decisions and actions. Ethical people do what they believe is right. • The term integrity is often used in business to describe this personal quality. • Modern business ethics are expected to include a sense of social responsibility or a concern for the condition of society.

37. Business Code of Ethics Typically include: • responsible to the organisation’s stakeholders • commitment to ethical business practices • policies on employment & human resource issues • statements about the organisation’s active social responsibility.