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Business Management
Unit 3: Corporate Management AOS 1: Large Scale Organisations
AOS 1: Overview Large-scale organisations are important for the Australian economy in creating employment, wealth and income. Every large-scale organisation operates within a unique context, characterised by its internal and external environment.
In this area of study, students examine the importance of large-scale organisations to the Australian economy. They identify and apply a range of performance indicators to evaluate the performance of a large-scale organisation.
A wide range of stakeholders exist for large-scale organisations. Students consider the organisation’s impact on stakeholder interests, possible conflicts that may arise between different stakeholder interests and related issues of ethical and social responsibility.
AOS 1: Key Knowledge Outcome 1: On completion of this unit the student should be able to discuss and analyse the context in which large-scale organisations operate.
Key knowledge
0 the context which contributes to the unique nature of large-scale organisations;
0 characteristics of large-scale organisations;
0 variations in types of large-scale organisations, their objectives and related business strategies;
0 typical management functions in large-scale organisations, including operations, finance, human resources, marketing, and research and development;
0 contributions, both positive and negative, of large-scale organisations to the economy;
0 internal and external (operating and macro) environments of large-scale organisations;
0 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;
0 identification and characteristics of stakeholders of large-scale organisations, including their interests, possible conflicts and related ethical and socially responsible considerations.
Chapter 1: Large-Scale Organisations
1. Name five businesses you have dealt with already today.
2. How many of these are considered large businesses?
3. How did you determine if the businesses are large?
What criteria did you use?
4. What is a manager? What does a manager do? Give examples.
What makes an organisation ‘large-scale’? Number of employees
Total assets Annual total revenue
Net-profit after tax
Extent of operations
ABS Classification ‘those employing 200 or more people’
The total value of what an organisation owns. Considered large if assets exceed $200 Million+
The total value of sales made (before expenses etc. are considered). Large organisations generally have revenue in the billions of dollars
Profit = revenue – expenses. Large companies make profit in the millions . billions
Organisations owned and based in one country and have branches, offices and operations in other countries.
Woolworths is the largest Employer in Australia, with 94,408 employees
NAB has an approximated $484 Billion in total assets
In 2007, BHP Billiton reported $55.9 Billion revenue
BHP made $15.8 Billion in 20017.
E.G. Nike, Apple, Holden
**LSO’s often also have multiple locations. The acronym we use is EARL
Types of large-scale organisations Corporations (or companies) By manufacturing or selling goods or services, corporations aim to make a profit or add to their net assets. Corporations / companies are either privately owned (up to 50 shareholders) or listed on the stock exchange and a re publically owned by many shareholders. Usually controlled by a board of directors. E.G. BHP Billiton, Woolworths
Government Business enterprises A corporation owned by the government and shareholders. Its main objectives is to provide a service or product to the public and make a profit in doing so. E.G. VIC Roads
Charities and Foundations Charity: an organisation that exists to provide assistance in the form of goods, services or finances to disadvantaged or marginalised groups in society. E.G. Salvation Army Foundation: An organisation that exists to further or promote a particular cause. Usually involved in research or education. E.G. The Heart Foundation
Government departments An organisation for which the government is responsible. Its main objective is to provide a service to the public. E.G. The Australian Taxation Office.
Activities
0 1.1 0 Page 7 0 Questions 1 & 2
0 1.2 0 Page 11 0 Question 1
Classification of large-scale organisations
0 Organisations can also be classified based on the industry sector in which they belong
0 Industry sectors are associated with the particular area of production in which the organisation operates.
0 PRIMARY: Industries that extract or draw resources directly from nature
0 SECONDARY: Industries that transform raw materials into finished goods or intermediate goods
0 TERTIARY: Industries that provide services, in particular the sales and distribution of finished goods 0 Quaternary Sector: Industries involved in the provision of
information 0 Quinary Sector: Industries involved in the provision of
hospitality and domestic services.
Activities
0 1.3 0 Page 14 0 Questions – 1,2,4,5
Management Functions in LSO’s A manager’s job is to plan and coordinate resources and activities to help achieve goals and objectives defined by the board of directors. There are four main types of resources: 0 Land or physical resources, such as plant and equipment 0 Labour or human resources, such as employees –
(THE MOST IMPORTANT RESOURCE) 0 Capital or financial resources 0 Knowledge or information resources. The way these resources are combined will distinguish one organisation from another.
Management functions… Most large scale organisations are structured so that managers, teams and departments are responsible for each of the major functions within the organisation. The major functions include:
0 Operations management – deals with day to day core activities
0 Human resource management – deals with the management of people
0 Financial management and administration – includes accounting and admin’ support services
0 Marketing and sales management – promotes the organisation and its products
0 Research and Development – resources are dedicated to furthering the industry, product and operations of the organisation.
!
Organisational Structure – Management hierarchy
Manager or Leader 0 In the past a manager was seen as a person who
coordinated an organisation’s resources in order to achieve specific goals.
0 Twenty-first century mangers also need to be able to
lead an organisation as well as coordinate its resources.
0 Due to the constant changes in the modern world, in theory they need to be able cast and recast the vision of the organisation while bringing all the other people along with them.
Activities
0 1.4 0 Page 16 0 All questions
Contribution of large-scale organisations to the economy
Large-scale organisations make a significant contribution to our economy because of their size and their efficient production of goods and services. Large-scale organisations contribute to our economy through: 0 Provision of employment – they employ around 33% of our
workforce. Woolworths and Coles each employ over 94000 people. This there is less unemployment and more income for the economy. Therefore more people are employed in other industries.
0 Economies of scale and contribution to Gross Domestic Product -
large organisation incur lower costs per unit of output because they operate on a large scale. This means lower prices for the consumer. This leads to higher and more efficient levels of production. 70% of all goods and services produced in Australia are produced by large-scale organisations. They contribute to 55% of our GDP.
Contribution of large-scale organisations to the economy…
0 Improvements to Australia’s industrial base – LSO’s are large investors in equipment, machinery and state-of-the-art technology. They stimulate the growth in Australia’s infrastructure. In an attempt to develop ‘world’s best practice’ they continue to develop their companies and invest in new infrastructure. Other Australian businesses then benefit from this.
0 Research and development – in the competitive world LSO’s invest in R&D in the search for better products. This can lead to benefits for other Australian businesses. For example, Telstra may research the use of 3G, introduce it to the market and then other businesses benefit by have internet on mobile phones.
0 Export earnings – Australian exports help earn foreign income for
Australian businesses. Increasing exports also helps retain employment.
Negative Contribution of large-scale organisations to the economy…
0 Downsizing / Outsourcing
0 Environmental (Pollution, Carbon Footprint)
0 Importing
Operating environments of large-scale organisations
0 Managers need to understand the environments in which their business operates in order to manage any future opportunities or threats.
0 Businesses in Australia operate
in an open and interactive environment. How a business operates and performs is dependent upon its specific internal and operating environments. The macro environment also exerts pressure on all businesses.
Operating environments of large-scale organisations…
The macro environment refers to a range of factors or pressures external to the organisation which are likely to have an indirect impact on the business. Changes in the macro environment usually have an impact on more than one business. They can include pressures such as; 0 Social 0 Technological 0 Economy 0 Environmental 0 Legal 0 Political 0 International / 0 Global
Operating environments of large-scale organisations…
The operating environment refers to a range of factors or pressures external to the organisation which are likely to have a direct impact on the operation of the business. The business can interact with its operating environment. It includes pressures such as; 0 customers 0 competitors 0 suppliers 0 trade unions 0 lobby groups 0 financial institutions 0 and regulatory bodies.
Operating environments of large-scale organisations…
The internal environment refers to a range of factors or pressures which the organisation has some degree of control. It includes pressures such as such as; 0 shareholders/owners 0 management 0 employees 0 organisational structure 0 and corporate culture.
Stakeholders Stakeholders are people or groups who have a vested interest or stake in what happens on a particular large-scale organisation. They can be internal or external.
Each of these stakeholders has either issues or interests associated with the organisation.
Stakeholders… Classify each of the following stakeholders into their respective environments: 0 shareholders 0 directors 0 management 0 employees 0 trade unions 0 customers 0 suppliers 0 creditors/banks 0 the community 0 government 0 and competitors.
Stakeholders & Environments
0 Business success is dependent upon being able to respond quickly to changes or pressures that come from either its external or internal environment.
0 Awareness of the interests and issues of stakeholders must also be taken into account.
Objectives of large-scale organisations
0 All organisations exist to achieve specific goals which are developed from the organisation’s vision and mission statements. The goals and objectives form part of the strategic hierarchy
Objectives of large-scale organisations… Vision Statement
0 At the top of the strategic hierarchy is the vision statement which describes the future direction and outlook of the organisation.
0 It is a ‘dream’ of what the organisation will look like in the future. It provides a focal point.
Mission Statement
0 The second step on the strategic hierarchy is the mission statement. It is more concrete and less philosophical than the vision statement. It will spell out ‘who’ the organisation is, ‘what’ the organisation does and ‘how’ it will achieve its objectives.
0 It is a short concise statement of its goals and priorities. These goals should relate to specific objectives of the organisation.
0 A vital role of the mission statement is to motivate employees and give them a sense of priority.
Objectives of large-scale organisations… Communicating Statements 0 The mission and vision statements can be communicated to
the public in a number of ways. They may use annual reports, or logos, corporate mottos or slogans.
Using Statements 0 The mission and vision statements can help managers
develop goals and objectives for the organisation. The manager should set short-term, medium-term and long-term objectives that can be implemented across all levels of the organisation. All objectives should be: 0 focussed on results 0 specific 0 attainable and measurable 0 Related to time
Objectives of large-scale organisations…
Objectives 0 The third tier of the strategic hierarchy is organisational
objectives. These are written statements about what the organisation is trying to achieve and how it will achieve them. There are many stakeholders involved in developing objectives.
Strategic objectives important long-term objectives of an organisation, usually set for a period of two to five years; established for an entire organisation by its senior management Tactical objectives often referred to as departmental objectives, established by departmental managers for their area of responsibility Operational objectives objectives established by front-line managers for their work team or area of responsibility with a daily, weekly or monthly time span
Types of objectives Financial objectives 0 objectives relating to achieving financial performance 0 To increase profits by a stated percentage. 0 To reduce production costs by a stated amount. 0 To gain a stated percentage of market share.
Service objectives 0 an organisation’s desire to provide a stated service either to its
clients/customers or to the community at large 0 To meet the needs of our customers.
Social objectives 0 objectives relating to the level of participation in and contribution
to community/society 0 To promote equity in the workplace. 0 To support unemployed youth through our recruitment program.
Stakeholder Objectives Stakeholders 0 These are the people who have a vested interest in the
achievements of a company. They are individuals, groups or other companies who have interdependence with the organisation, but have objectives of their own.
0 What do the following stakeholders of Woolworths want? 0 Customers 0 Employees 0 Suppliers
Measuring organisational performance
All stakeholders in an organisation want to know how it is performing. Efficiency and Productivity Efficiency measures the best use of the resources of an organisation to produce goods and services. It is the relationship between resource inputs and outputs. EFFICIENCY: “Doing things right” These resources can be; 0 time 0 money 0 labour (human) 0 Materials and equipment.
Measuring organisational performance
Productivity is a quantitative measure of efficiency. It measures the relationship between resource inputs and outputs. An organisation is said to have increased its productivity when it produces more outputs from a given amount of inputs. Work place changes associated with increased efficiency include: 0 Increased automation 0 Use of information and communication technologies 0 Improvements in the skill level of employees 0 New processes to how tasks are performed 0 Team approaches to work 0 The use of Just in Time processes 0 Total Quality Management processes
Measuring organisational performance
0 Effectiveness is the ability to achieve previously determined organisational goals and objectives. An organisation is effective if it is achieving its goals. For example, if an organisation planned to increase its market share over the next three years and this was achieved, then the organisation has been effective.
0 EFFECTIVENESS: “Doing the right things”
Performance Indicators
0 Performance Indicators (PIs) are used to measure how well a business is performing or meeting its goals. They can be both quantitative and qualitative measures. Quantitative measures are based on collected numerical data. Qualitative measures are subjective and based on people’s opinion.
Performance Indicators Listed specifically in the study design:
0 percentage of market share 0 net profit figures 0 the rate of productivity growth 0 the number of sales 0 results of a staff and/or customer satisfaction survey 0 the level of staff turnover 0 level of wastage 0 number of customer complaints 0 number of workplace accident
Ethics and Social Responsibility Social and ethical performance 0 Nowadays, businesses are also increasingly concerned with their
performance in relation to ‘social responsibility’ and ‘ethical management’.
0 the ‘Balanced Scorecard’ approach (which measures performance in relation to learning and innovation, and from customers and employees points of view, as well as financial performance) and
0 Triple bottom line accounting (where an organisation measures its performance not just in terms of profit but also in relation to its effect on the environment and community).
0 Stakeholders such as employees, shareholders, government, customers, suppliers and competitors all have an interest in the performance of the organisation.
0 Other measures of social and ethical performance are carried out by the business press or business peak bodies such as, the ‘Business Review Weekly’ and ‘Dow Jones Index’.
Activities
0 1.10 0 Page 32 0 Question 1
AOS 1: Key Knowledge Outcome 1: On completion of this unit the student should be able to discuss and analyse the context in which large-scale organisations operate.
Key knowledge
0 the context which contributes to the unique nature of large-scale organisations;
0 characteristics of large-scale organisations;
0 variations in types of large-scale organisations, their objectives and related business strategies;
0 typical management functions in large-scale organisations, including operations, finance, human resources, marketing, and research and development;
0 contributions, both positive and negative, of large-scale organisations to the economy;
0 internal and external (operating and macro) environments of large-scale organisations;
0 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;
0 identification and characteristics of stakeholders of large-scale organisations, including their
interests, possible conflicts and related ethical and socially responsible considerations.
