VCAA Business Management Operations management

Eshan’s breads could use Just In Time, which involves the right number of inputs arriving just as they’re needed for production. By ensuring their ingredients to make bread like flour, oil and sugar only arrive as they’re needed for production, this can reduce the amount of ingredients in Eshan’s inventory that may spoil and become unusable, thus reducing wasted inputs and the costs associated with this wastage, which is an optimal use of resources, improving efficiency of inputs at Eshan’s Breads.

An automated production line (APL) refers to a process where raw materials enter and finished products leave with little to no human intervention. This can reduce the time and labour resources used as the APL will quickly transfer the bread through the entire production process without requiring manual handling or manual mixing of ingredients etc., which optimises resource use and reduces inputs required to produce their bread, thus improving efficient management of its processes. Furthermore, this will allow them to reduce wastage (as an APL is often very accurate) in the form of low-quality bread, cracked eggshells and improve the quality of their product, meeting customer expectations, reducing level of wastage and increasing sales of their bread, thus meeting its objectives and therefore improving effectiveness.

One quality management strategy that could be used to improve effective management of outputs (the produced good/service being bread) is quality control. As quality control refers to the evaluation and checking of bread by highly trained quality control teams, this will ensure that Eshan’s Breads are able to produce crisp and fresh bread as desired in their business objectives. Through inspection and removing the sub-standard bread before reaching the supermarkets, restaurants and catering businesses, Eshan’s breads are able to achieve their objectives of increasing customer satisfaction through removing faulty or undesirable bread. This will ensure that Esha’s Breads is able to maintain a good quality reputation and this leading to an increase in sales, revenue to achieve business objectives of profit (expense deducted from revenue) where quality is under constant surveillance.

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• Production management systems deal with converting raw materials into finished goods or products.
• This is done by deciding on the inputs, outputs, processes and controls that need to take place in order to ensure a product or service is created in line with the specifications, within the quantity and by the schedule demanded and at a minimum cost to the business.

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Quality assurance:

• is the process of guaranteeing a product’s quality to the consumers
• informs customers that products have been manufactured to a quality standard doing things ‘right the first time’
• involves checking and reviewing the production process
• focuses on preventing poor quality products as opposed to correcting problems
• can allow employee participation, generating new ideas for operations, processes and the quality of the end product, resulting in improved staff morale
• can result in a reduction of production costs, less waste and reworking of products.

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Quality improvement:

• is the systematic approach to reduction or elimination of waste, rework, and minimisation of losses in the production process
• refers to the continuous improvement process focused on processes and systems
• involves to the analysis of business performance and business efforts to improve performance
• includes features such as benchmarking or quality circles, Kaizen and Total Quality Management.

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• Communicating directly with customers globally through email, or video conference such as Zoom or teams calls assists in global distribution.
• Businesses can use a website for e-commerce: customers are purchasing more and more online and are receiving products delivered to home through enhanced technology in transport, tracking and delivery systems.
• Technology can be used to help track inventory of global distribution in real time.
• Technology aids in the transfer of equipment and delivery methods.
• Technology can be used to reduce costs and improve accuracy in procurement and inventory.
• Technology enables increased access to data and collaboration in supply chains.
• Technology can be used for faster planning and decision making, hence faster problem solving.
• Technology used in transportation, such as GPS technology, makes tracking faster and more efficient.
• The use of apps facilitates quick, efficient procedures, including the use of credit cards with encrypted payment facilities which are safe.

The first element of the operations system is inputs. These are the raw materials and resources, sourced from suppliers that will be used within operations to produce a profitable product/service. The second element is transformations. Transformations is where inputs are put through many processes within the operations system to become an output. The third element is outputs. An output is the final/end product/service the business invested its time and resources into producing, the profitable end product/service. WCTY Cleaning Service is a service based business, but their inputs remain fairly similar to a manufacturing business. Their inputs would be labour, cleaning tools such as vacuums, mops, washing machines, that are used to perform the service of cleaning homes.

If WCTY Cleaning Services were to adopt technological developments such as adopting more advanced cleaning materials, they could improve the efficiency of their operations system. This is because the use of more advanced technology such as more advanced cleaning materials will allow them to save time when providing their services. With the example of adopting technological development through the use of using more advance cleaning tools, WCTY Cleaning Services will be able to save time, as these tools will likely be able to perform jobs quicker, while still maintaining a high quality in the service provided, hence improving efficiency in operations as time is being saved without sacrificing quality.

WCTY Cleaning Services could use forecasting. Forecasting is a materials strategy which involves analysing past data and market trends to make an educated prediction about customer demand for an upcoming period.

WCTY Cleaning Services could analyse this data and make predictions about the amount of materials e.g. Sponges, staff (labour resources) required to meet customer demand for an upcoming period e.g. if a holiday e.g. Christmas is approaching and there is a demand for house cleaning. WCTY Cleaning Services will be prepared as they will predict this demand and order sufficient materials. This efficiently manages materials by reducing waste and optimising resources as it prevents the possibility of over-ordering and therefore, inventory stock expiring or being damaged. Furthermore, this will improve productivity by preventing halts to production caused by insufficient materials.

WCTY Cleaning Services could use total quality management (TQM). This is a holistic approach to quality management which involves employees being continuously committed to improving the quality of this product or service. This occurs through three steps of: customer focus, continuous improvement and employee empowerment.

This could be implemented to ensure high quality cleaning by first looking at customer focus, addressing the desires and needs of customers and the desires that WCTY Cleaning Services intends to fulfil. Next the business should look at continuous improvement which involves looking at the method used by the business e.g. scrubbing with one hand, and identify methods to improve it e.g. scrubbing with two hands. Lastly, the business should look at employee empowerment which involves fostering an environment of employee participation and encouragement. This step could involve regularly conducting quality circles, where a group of employees meet and discuss solutions to quality related problems. These steps will ensure that all employees are committed, and motivated to improving the quality of their service so that the entire business, across all branches, is performing to a high standard that satisfies customers’ needs.

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The just-in-time technique is an inventory technique that is based on inventory being manufactured at the time the products are needed – just the right amount/number of goods/services needed. These products would also be delivered to customers upon completion of the production process. This eliminates the need for inventory storage, wastage and other costs.

Advantages:

• there is a less storage space needed which allows a business to save on rent and insurance costs
• discourages the build-up of any unsold products
• there is a minimal chance of stock becoming ‘out-of-date’.

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The just-in-case technique is an inventory technique that is based on having spare inventory which could include raw materials, spare parts, etc. in stock just in case it needs to be used. The business is manufacturing its products based on either a predicted or planned sales rate.

Advantages:

• there is a greater ability to meet any unexpected increases in demand for the business’ product as there is always inventory on hand to meet these demands
• businesses hold large amounts of inventory just-in-case there are surges in demand or supply
• reduces down-time in production as there is no delay in inventory from suppliers
• customer satisfaction is maintained as production does not wait for materials to be delivered
• businesses could reap the benefits of economies of scale, such as buying supplies in bulk.

Chef@Home could introduce lean management, which is an ongoing management philosophy, whereby they seek to reduce wastage in each area of the business while still providing quality and value to customers. They can adopt the ‘pull focused’ principle whereby they only prepare and package the required amount of meals as demanded by customers, perhaps after they order it online. This will minimize wastage in terms of over-production of pre-made meals that will not be sold and thus have to be discarded. They can also minimise waste in regards to time through adopting the ‘flow’ principle, and minimising any wait times in their preparation and packaging of meals. Reducing starts and stops and bottle necks will minimise time that may otherwise be wasted improving the efficiency of operations.

Forecasting is a materials management strategy that uses data from the past and present and analysis of trends in attempts to determine future events. An advantage of forecasting is that it allows Chef@Home to identify what needs to be produced, in what quantities, how and when. This will result in “all inputs from local suppliers” actually being used and not wasted, thus assisting to improve efficiency of operations as Chef@Home is able to better utilise their resources. Moreover, Chef@Home using forecasting to order inputs from local suppliers in advance avoids the risk of having to outsource to other suppliers as they do not have enough inputs currently to supply boxes. As a result of this, Chef@Home will be improving the effectiveness of its operations as it is able to order inputs in advance to ensure all inputs are from local suppliers, this improving the business objectives of all locally sourced inputs.

However, a disadvantage of forecasting is that it will represent a cost to Chef@Home if the wrong quantities are calculated as it will lead to overproduction or underproduction. Overall, forecasting would be good to improve operations as it ensures that all local sourced inputs will be used.

A strength of sourcing from overseas suppliers is that this would allow Chef@Home to have reduced expenses, as typically overseas suppliers charge lower costs due to paying lower labour costs, hence passing on the difference to customers. Thus, this would help to increase Chef@Home’s net profit figure, hence they would have more capital for expansion, assisting Chef@Home to expand their business allowing for competitiveness to increase because they are able to operate and ship to a wider range of locations, due to this growth. However, a weakness of Chef@Home sourcing from overseas suppliers is that given the nature of the product, food, being perishable there is a risk that the ingredients could go bad given the travel time to ship them to the Chef@Home headquarters prior to being packed. Thus, this would likely increase waste at the business as they would have to discard a large amount of their inputs, increasing waste and thus limiting efficiency at Chef@Home. However, another strength is that by globally sourcing inputs Chef@Home may be able to purchase inputs which are unavailable locally. Thus, they may be able to offer a wider range of meals to customers in their boxes with these exotic ingredients. Thus, this would likely allow Chef@Home to create a point of difference from competitors, this allowing for a competitive advantage. However, a weakness of Chef@Home globally sourcing their ingredients is that they are not displaying social responsibility and sourcing inputs from local suppliers to promote local jobs in the community. Thereby this may damage the businesses reputation, as in an age of conscious consumers, many customers want to buy from businesses who support local jobs. Thus, through Chef@Home globally sourcing inputs they may lose competitiveness along with lowering percentage of market share.

Businesses may need to contend with global issues in operations management as a way of remaining competitive, profitable and efficient in their processes. Global considerations help a business to sustain a long-term position within a market.

Global sourcing of inputs is the practice of seeking the most cost-efficient materials and other inputs from markets overseas. This strategy allows a business to exploit efficiencies that can be gained from the global delivery of products. For instance, a business that implements this practice will likely reduce costs in their production process by accessing lower-cost raw materials in countries such as Indonesia and Bangladesh that have lower wage costs in comparison to Australia, in addition to lower taxes and trade tariffs. Reducing costs in the sourcing of inputs can allow a business to operate more effectively, by increasing their overall net profit.

The global consideration of overseas manufacture involves the production of a good in a country that is different to the location of the business's headquarters. Kmart is an example of a business that employs this strategy as it can enable a business to get its product to the market more quickly, as the overseas business will specialise in the core task of manufacturing a particular good. If this is achieved, it can give a business a competitive advantage in the market, leading to an increase in market share and effectiveness.

Global outsourcing is the practice of transferring some aspect of a business's operations to an external person or business overseas. Generally, businesses seek to outsource tasks that are not part of their core activities. For example, Telstra outsource their customer service call centres to a company in the Philippines. A business that uses this strategy will achieve improved quality in their production process, as there is often a higher level of expertise and skill provided by the overseas provider, as they specialise in a core task, as opposed to performing many different tasks. This allows a business such as Telstra to operate more efficiently, as it frees up time to focus on core activities, thus maximising productivity in the process.

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• when Australian businesses choose to use Australian resources and labour, businesses contribute towards local job creation, supporting the Australian economy
• for example, Australian farmers and manufacturers benefit from businesses demanding locally sources materials
• Australian made products are associated with high quality, safe and ethical standards, thus businesses can leverage the 'Australian Made' logo which appeals to consumers who prefer to buy and support domestic industries
• home grown production and manufacturing reduce reliance on international suppliers which in turn reduces risks from global disruptions such as pandemics, political conflicts and shipping delays. This ensures more efficient production
• home-grown products reduce transport distances supporting environmentally sustainable practices
• Australian businesses can often charge a premium price for locally made products as customers a willing to pay a higher price for Australian craftsmanship
• Australian businesses creating home grown products can sometimes access government incentives such as grants and tax benefits and receive strong community support
• local production can allow businesses to maintain a better oversight of the manufacturing processes ensuring higher quality products, as well as maintaining better treatment of staff.

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A business may consider the following points when making decisions about using offshore labour:

• ethical businesses will ensure there are fair labour practices, ensuring offshore workers receive fair wages and work under safe conditions, avoiding exploitation
• businesses, in their decision making, should choose suppliers or factories adhering to international labour standards to avoid negative publicity
• if business do not consider the role of ethics in their global business decisions, they risk reputational damage. Poor labour practices, such as employing underage workers or unsafe conditions, can lead to consumer boycotts and legal consequences thus making ethical decisions can reduce reputational and financial risks.

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Grant: Export Market Development Grant (EMDG) provided by Austrade

• gives qualifying businesses funding for costs such as market surveys, advertising campaigns, and for attending international trade fairs
• assists small to medium-sized businesses to overcome financial barriers toward international market entry
• aids businesses via its eligible promotional expenses, helping them to expand their market presence globally
• provides financial support in order to develop sustainable export strategies.

Taxation: Research and Development Tax Incentive (R&DTI)

• offers a tax offset for companies conducting eligible R&D activities
• encourages investment in R&D to help a business to grow and innovate, which generates benefits for the Australian economy
• depending on the business' annual turnover, the R&DTI provides either a refundable or non-refundable tax offset.

Customs duty:

• can be claimed on excise equivalent goods (EEGs)
• businesses can claim a refund of some or all the customs duty that they have paid on EEGs in some situations. For instance, if they can prove that EEGs were damaged while they were in customs before delivery into the Australian market
• businesses are not able to claim a refund or drawback on fuel if they are eligible for a fuel tax credit.

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• A patent can give Smoothex exclusive rights to manufacture and sell any device, substance, method or process that is new, inventive and useful. When Smoothex expands globally it can apply for a patent in countries individually. This might be a good option if it only sells in a few countries.
• Alternatively, Smoothex can register a patent in multiple countries under the Patent Cooperation Treaty (PCT).
• The PCT is administered by the World Intellectual Property Organisation (WIPO), of which there are 148 participating countries. If the WIPO approves the patent, the intellectual property (IP) is protected in the countries that are members of the treaty. A patent is maintained if annual fees are paid. Patents must also be updated if there are any changes to the device, substance, method or process. In addition, Smoothex would have to file individual patent applications in the countries that are not members of the PCT.
• If Smoothex does not register for a patent, it is at risk of others stealing or using its idea, creating a loss of income and competitive advantage.

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Corporate social responsibility:
Corporate social responsibility requires Smoothex to achieve its business goals in the context of the broader system in which it operates, thus giving due consideration to the community, society, triple bottom line and environment of a range of stakeholders. For example, Smoothex could support local charities (through donations/corporate sponsorship) in Indonesia and Malaysia. This could build positive relationships with the local communities and also help develop a positive business image in these countries.

Environmental sustainability:
Environmental sustainability requires Smoothex to adopt environmentally responsible operations such as use of dyes, recyclable packaging, waste of materials and recycling of supplies where possible. Smoothex could apply these to its operations to develop a positive public image and engender staff loyalty due to the respect demonstrated for their local country and its environment.

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Levels of education:

• This can affect each country's economic environment. Levels of education differ depending on whether the country is more developed or industrialised, less developed, or a newly industrialising or emerging economy.
• Smoothex will need to consider the level of education in the countries to which it intends to export.
• if there is a skills shortage in a country, Smoothex will need to base employees overseas and use financial packages to attract staff. There may be issues in using technology, inability to fill positions or an understanding of how to store or sell Smoothex skincare and cosmetics.

Customs:

• When doing business in another country, Smoothex will need to consider cultural differences that may be presented.
• Cultural differences could include basic customs, mannerisms and gestures. For example, if a salesperson approaches a meeting with knowledge of a custom's cultural background, then his/her words, body language and actions can all be adapted to better suit those of the customers.
• Understanding cultural differences and adapting to these differences will allow Smoothex to be better liked by customers in Indonesia and Malaysia.

Holidays and celebrations:

• Smoothex can use this to provide content to put on their social media pages for marketing purposes, such as Christmas holiday sales or using a celebration as a background to sell products or services for Chinese New Year or Halloween.
• Indonesia and Malaysia have a multi-cultural background and people celebrate a wide variety of holidays.
• Smoothex will need to be aware of the holidays and celebrations in the countries in which it is hoping to do business to ensure its success.

Religious beliefs:

• The main religion of a country can influence the way Smoothex conducts its business.
• Although very few religions influence business activities directly, the impact of religion on human value systems and decision-making is significant. Thus, religion exerts a considerable influence on people's actions and outlook on life, as well as on the products they buy.
• Smoothex will need to be aware of the religious beliefs of Indonesia and Malaysia to ensure that it does not offend its customers.

Business etiquette:

• The formality of address is an important consideration when dealing with colleagues and business partners from different countries.
• Consider if they prefer titles and surnames or being on a first name basis.
• While it can vary across organisations, Asian countries such as Indonesia and Malaysia tend to use formal 'Mr/Ms Surname', while Australians and Americans tend to use first names.
• Smoothex will need to be aware of business etiquette in the countries in which they choose to operate.

Communication protocols:

• It will be important for Smoothex to understand the importance of subtle non-verbal communication between cultures as this can be equally crucial in international business.
• What might be commonplace in one culture – be it a firm handshake, making direct eye contact, or kiss on the cheek – could be unusual or even offensive to a foreign colleague or client.
• Where possible, Smoothex will need to research in advance the professional protocols required with individuals from the Indonesian and Malaysian cultures.
• Staff will need to be perceptive to body language, and when in doubt, to ask. While navigating cross-cultural communication can be a challenge, approaching cultural differences with sensitivity, openness, and curiosity can help to put everyone at ease.

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Economic activity:

• Both Indonesia and Malaysia are countries in the Association of South East Asian Nations (ASEAN) thus having a positive impact on business operations.
• Australia has free trade agreements in force currently with both Indonesia and Malaysia, which promotes economic activity between Australia and both of these countries.
• Low inflation in Australia means interest rates are likely to be kept low, which will allow local consumers to continue to purchase products from Smoothex. This will help maintain or increase revenue from Smoothex to support its investments overseas.
• Consumption patterns and income levels will influence pricing and distribution strategies for Smoothex.
• Indonesia and Malaysia have a growing number of women in the workforce who earn enough disposable income to buy cosmetics from Smoothex, thus improving opportunity for successful business operations in these countries.
• Fluctuations in exchange rates between the three countries have been low, thus, providing attractive pricing of products and making them more attractive to potential customers.

Discretionary spending:

• As the economies of countries develop there are people earning acceptable wages in stable employment. Therefore, consumers may have more discretionary income.
• The stimulus material states there is 'growing number of females who are becoming a part of the workforce in those countries'. So 'there is likely to be a high demand for Smoothex skin care and make-up products'. This is due to the increased discretionary income.
• An increased discretionary income in Indonesia and Malaysia could impact Smoothex in a positive way, as it could lead to increased sales.
• If the discretionary income is reduced, then customers are less likely to buy products from Rani and they are more likely to spend their income on essentials such as food rent, clothing or education. The current global economy could cause customers in Malaysia and Indonesia to have reduced discretionary income. This would impact Smoothex in a negative way.

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World Trade Organisation (WTO) regulations and sanctions:

• The WTO is an organisation that sets standards for international trade and rules of Free Trade Agreements (FTAs).
• Its role is to combat multinational corporations that exploit developing nations with regard to environment and labour.
• The WTO sets standards of transparency of trade partners, lowers barriers for increased access to the global market and helps facilitate trade agreements.
• It is also charged with the task of resolving conflicts if they arise, thus helping drive global business development.

Consumer purchasing and spending patterns:

• Involves human behaviour of how a consumer makes a decision to acquire or purchase a product.
• If spending patterns increase in a country, or the availability of higher spending patterns occurs, it allows for opportunities for a business to expand globally.
• As most people have access to the internet and smart phones, thus consumers’ awareness of products and ability to purchase products globally has helped drive global business development. For example, during the pandemic, online shopping grew tremendously, making opportunities for online businesses to grow and innovate.
• The availability of credit and the Australian dollar strengthening has increased purchasing power in Australia.
• There is a greater choice of products, secure and reliable payment systems, and an increased level of satisfaction with online shopping among all ages groups.

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Globalisation is the spread of products, technology, information and jobs across
national borders and cultures, which has led to international cooperation.

The impact of globalisation on international cooperation:

• Multicultural societies show increased diversity, understanding of other cultures and norms, increased travel, migration and thus exposure to more diversity. Therefore, international cooperation is enhanced though globalisation.
• The impact of globalisation has seen increased policy and/or practice of cooperation among societies/countries, improving relationships and cooperation internationally politically, socially and economically. Australia’s engagement with the Association of Southeast Asian Nations (ASEAN) is an example of strategic partnerships across nations.
• Globalisation has led to collaboration between nations such as the World Trade Organisation, World Health Organisation, increased FTA’s, development of the United Nations (UN) and working towards projects such as the UN Sustainable Development Goals.

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• Environmental responsibility could involve the use of renewable energy or the reduction of energy consumption.
• Reduce waste by implementing a recycling program and/or using recyclable packaging. For example, instead of using disposable cups, offer such things as travel mugs and stainless steel water bottles.
• Conserve energy within the office by turning off lights and equipment during non-office hours.
• Conserve resources by promoting a paperless office by creating digital and cloud computing solutions.
• Communicate environmental practices to consumers to explain the recycling steps you are using to encourage their support and possibly follow your example.

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• the International Labour Organisation (ILO) is a United Nations' agency dealing with labour issues, particularly international labour standards and decent work for all workers
• in sweatshops, workers are paid little for their work, are forced to work unpaid overtime with no breaks, and are punished for any mistakes or for working slowly. Woodyz and Beards R Us must ensure that they pay their workers fair pay
• Woodyz and Beards R Us should adhere to fair wages, and occupational and health regulations for their workers in order to ensure long-term business success and to maintain a good public image
• the ILO understands that children may have to work and Woodyz and Beards R Us need to ensure strict standards and prevent the exploitation of children
• Woodyz and Beards R Us need to be aware of the ILO's Minimum Age Convention which states that 13 to 15-year-olds should only engage in light work around their schooling; 15 years is the minimum age for work; 18 years is the minimum age for any hazardous work.

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Venture capital:

• this involves investment in small to medium-sized businesses that have a strong growth potential, normally at the start of a business idea
• the amount borrowed can be paid back over a number of years.

Secured loans:

• this type of finance is obtained from a bank or other financial intermediary that can be for short-term or long-term
• interest charges can be fixed or variable on the loan. The amount borrowed is paid back over a nominated period of time.

Financial institutions:

• these include banks, finance companies, merchant banks, life insurance companies and general insurance companies
• financial institutions provide various short-term and long-term loan options for Woodyz and Beards R Us.

Government:

• can offer financial support to businesses or industries by providing government grants
• the one-off payment to businesses is beneficial as they do not need to be repaid.

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Discretionary spending:

• Woodyz and Beards R Us would need to do accurate and timely market research to determine discretionary spending habits and patterns of current and developing global markets
• Woodyz and Beards R Us would need to determine consumer confidence levels in the new market to see if consumers would purchase Woodyz and Beards R Us products if brought to this market
• Woodyz and Beards R Us would need to identify where its target markets are where consumers have sufficient disposable income to afford its products when these are brought to the market.

Interest rates:

• these may have an impact on spending patterns in global markets and may impact global expansion, especially when it comes to the development of infrastructure
• when businesses have access to finance with lower interest rates in other countries, they are able to more easily manage their repayments and reduce their costs
• Woodyz and Beards R Us can increase its level of investment but must be cautious if interest rates rise to enable it to manage its financial operations and global expansion.

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Merger:

Rationale: A merger occurs when two businesses combine to become one merged business with the view to gaining an operational or financial advantage.

Benefits:

• there is potential to still maintain some control of each of Woodyz and Beards R Us businesses while being more financially stable and with greater support
• there are increased financial benefits through better access to marketing which has the potential for increased profits
• there could be a potential to lower costs and increased profits, if both Woodyz and Beards R Us reduce their individual or combine their marketing and other operational costs
• Woodyz and Beards R Us could produce more products and in a greater variety, thus increasing their market share
• Woodyz and Beards R Us may enjoy greater efficiencies as they have access to shared facilities, resources and knowledge from both teams.

Joint venture:

Rationale: A joint venture would allow both businesses to develop a new project while still focusing on their individual core businesses.

Benefits:

• allows for the sharing of business' costs which allow Woodyz and Beards R Us to earn higher profits
• will enable Woodyz and Beards R Us access to a larger target market and customer bases which have already been established by each individual business
• this is an effective strategy because it does not change the existing businesses and can reduce the impact and demands on Woodyz and Beards R Us
• joint venture management can focus on the project instead of existing management taking on additional challenges or responsibilities
• once a project ends, the joint venture can be wound down and assets distributed according to joint venture ownership.

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Currency fluctuations:

• refers to changes in the exchange rate of a currency relative to another currency; these fluctuations can result in an exporter losing money
• exchange rates are determined by the supply and demand of a currency in the foreign exchange market
• factors that influence the supply and demand of a currency include a country's economic and political conditions, interest rates, inflation and market expectations.

Non-payment of monies:

• refers to a situation where one party fails to fulfil its obligation to pay money to another party
• can have significant financial consequences for the party owed money, especially if they rely on the payment to meet their own financial obligations
• to avoid non-payment, it is important to establish clear payment terms and conditions upfront, including deadlines, methods of payment, and consequences for non-payment.

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E-commerce:

• involves the use of websites where potential customers can view and purchase inventory
• allows a domestic business to enter global markets without having a physical presence in a target country
• the growth of e-commerce and the use of mobile devices have enabled better communication between staff, customers and suppliers around the world.
  Examples:
• customers can customise a business's website with a chosen currency and language to enhance their shopping experience
• businesses can use social media to sell their products online, allowing them to access a global market.

Distribution of products:

• technology can be used to communicate directly with customers globally through email and websites
• technology can be used to help track inventory and automate distribution in global markets
• technology in transportation will aid the transfer of products from domestic to international markets.
  Examples:
• GPS technology can be used to track data in real-time, making tracking faster and more efficient
• increased access to data and collaboration in supply chains using technology such as Zoom or Teams to assist.

The operations system of a service business is often much more customer focused, as the services are often much more catered to the customer, compared to the operations system of a manufacturing business which has little customer involvement. For example, KEJ’s Cafe’s operations system would involve more customer involvement, as customers may request specific menu alterations or drinks, which those in the operations system then must cater to in order to satisfy the customer and provide the service.

Performance appraisal is a performance management strategy which relates to the evaluation of the performance of the seven casual staff at KEJ’s Café on a range of different factors, including their customer service skills or quality of coffee or food they make. It involves providing employees with feedback and a clear path for improvement.

Performance appraisal could be used by the business to achieve the employee objective to make higher wages or incomes. As it is a café the performance appraisal process could act to highlight clear areas for employee improvement, as well as what they are doing well. This can act to make an employee be more polite, or improve their customer service skills when interacting with customers, or make better coffee. This could increase (the) level of tips received from customers to employees. Thus increasing the total amount of money they take home from a work shift, thus helping to meet the employee’s objective to make higher wages or incomes.

Secondly, one business objective is to make a profit (net profit relates to the total difference between revenue and expenses). Performance appraisal could provide feedback to employees and highlight areas that need improvement, thus improving the overall performance of employees. If KEJ’s Café is able to provide high quality food (e.g. toast), coffee and customer service, it will see returning customers and develop a high reputation. Thus increasing sales and revenue, and helping to achieve the business objective to make profit.

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Financial gain:

• An increase in satisfied customers can lead to an increased market share, sales and repeat customers. Innovation can also lead to creating a delay in the decline stage of the product lifecycle resulting in greater profit for Matilda.
• Product innovation occurs if Matilda sources new and/or more products to sell. This may increase interest, sales and, in turn, profit.
• Process innovation occurs if Matilda is able to improve her processes through new technology. She could see productivity gains and better customer satisfaction, resulting in increased financial gain.

Expansion of global market presence:

• Innovation can be a driver of business growth. Therefore, Matilda expanding into the European market will enhance her global market presence.
• Innovation can give Matilda a competitive edge over her foreign competitors.
• Matilda's innovation can lead to her successful expansion into Europe and ensure that she is competitive in global markets through her business being new and different.

Increased market share:

• Innovation can assist with producing more appealing/innovative products and, therefore, increase market share for Matilda when she expands into the European market.
• Innovation can create a competitive advantage. A new product can create a consumer demand for the product, resulting in more products being sold and Matilda's business' market share increasing in the European market.

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Timing:

• Timing can have an impact the success of innovation in terms of how it relates to customer purchasing cycles.
• Matilda has just read an ecommerce report in 2020 stating that European shoppers are spending more time shopping online. This means the timing is right for her to expand to Europe.
• It would be a good idea for Matilda to innovate her product, process and service while online marketplaces in Europe are attracting significant online traffic and high visitor engagement. This should lead to increased sales, thus success at this time is likely to be high and worth her investment in the innovation.

Cost:

• Investment in innovation, whether it is product, process or service, is costly.
• Money needs to be spent on research and development and can be significant. Therefore, it requires appropriate financial resources.
• Matilda has stated that she is willing to invest money into her business operations, so she has the best opportunity to be profitable.
• Matilda has seen a surge in online sales in 2020 and 2021. Therefore, she has income available to spend on innovation.
• If Matilda spends too much money on research and development, and innovation, and does not receive increased sales through the European market, she may be at risk of business failure.
• Matilda's financial investment in innovation may be important to her standing out from competitors in the European market, and be an important contributor to her success.

Answer(s) could include:

• Marketing through social media campaigns – researching and creating social networking sites used in Europe. This will be an easy and cost-effective way for Matilda to expand into the European Market.
• Adopting faster shipping technology. This will be positive for Matilda's business as it will improve customer satisfaction due to timely delivery of orders.
• Implementing safe payment methods – around the world customers are happy and confident utilising payment methods such as PayPal. This will assist Matilda expanding into the European market.
• Applying GPS delivery tracking systems – for both the business and the customer. This ensures the customer is updated via email or SMS, making them confident regarding the delivery of their order.
• Adopting e-commerce procedures. This will enable transfer of monies between currencies and countries instantly.
• Matilda can purchase relevant and reliable hardware and software for the business' needs. She can improve her website capabilities to change the language and/or apply different currencies. This will increase the business' reach to different countries where customers can make purchasing decisions using their own currency.

Answer(s) could include:

Availability of substitutes: Matilda needs to consider:
likelihood that customers will easily switch or use a competitor's product over hers.

• Are there similar products being sold online at a similar price or lower?
• Do the competitors pose a threat to her business' success?
• Are her products new, innovative and of high quality, compared to others on the market?
• Are there better-quality products available?
• Are there products of better value?
• Can she create buyer loyalty in Europe, or will consumers easily change brands?

Bargaining power of buyers: Matilda needs to consider the bargaining power of the buyers in Europe.

• What is the bargaining position of the buyers? Can the customers drive down the price?
• What is the level of quality and service demanded by buyers in Europe?
• What are the buyer numbers in Europe? Europe has a large population, therefore a large number of potential buyers.
• Which countries in Europe will have more buying power? Many parts of Europe have a large middle class, hence the disposable income to purchase Matilda's products.

Advice:
Due to the fact that Matilda is going to be investing in innovation of her product, process and service, the huge population of Europe and the fact that more European shoppers are spending significant time shopping online, there is no reason why she should not trial an entry into the European market. Her product is unique, luxurious and of high quality, thus should negate the issue of availability of substitutes.

The e-commerce report also affirms 'online marketplaces in Europe have attracted significant traffic and seen high visitor engagement that has translated into sales'. Due to the fact that more Europeans are spending time at home and shopping online, it is worth Matilda expanding her business into the European market.

Inputs refer to the resources used to make a business’ goods or services, such as raw materials, equipment or labour. Some inputs at Samaah’s Foodz include the ingredients used to make the savoury foods that are frozen, as well as the freezers used to freeze and store the product. Additionally, the employees employed to stack the frozen savoury food items are an input.

One low risk strategy Sammah’s Foodz could use is communication, which is the transferring of information (about the change to introduce new technology to broaden products and reduce waste) to employees. The communication of this change should openly and honestly outline the reasons and benefits for changing, including to achieve the new goals of broadening products and reducing waste, as well as communicating consequences of not changing. By allowing employees to clearly understand the reasons for change in order to remain competitive, they are more likely to accept the change and thus employee resistance can be overcome.

Sammah’s could minimise waste through the implementation firstly of ‘reduce’, which involves minimising unnecessary resources that do not add value to the final product. By identifying areas of their production process that do not add value, such as excess packaging around their frozen goods, they could begin only purchasing the minimum necessary packaging, thereby reducing that wastage that results when customers throw this material away.

Next, they could utilise ‘reuse’ to identify materials such as packaging that would otherwise be discarded, and use it again. For example, they could develop a system in which customers return the packaging from their products in return for discounts. Sammah’s could then reuse this packaging again and reduce its wastage.

Finally, they could utilise ‘recycle’ by using materials that would otherwise be discarded and transforming them into new products. For example, offcuts from the ingredients they use in their savoury foods could be repurposed into new meals, such as creating a new frozen soup range with the offcut ingredients, thereby recycling them and reducing waste.

One advantage of Porter’s differentiation strategy for Sammah’s Foodz is that it means that they will be able to charge premium prices for their frozen savoury items as their competition don’t have these items. Moreover, another advantage of Porter’s differentiation strategy for Sammah’s Foodz is that they will be able to attract a more loyal customer base whereby customers can only buy those products from them. Therefore, this can lead to an increased number of sales from their loyal customers.

However, one disadvantage of Porter’s differentiation strategy for Sammah’s Foodz as they seek to increase their sales is that it could be expensive to implement a range of products that their competition don’t have and so this could ultimately take away from their ability to focus on actually selling the items of a perceived value. Furthermore, another disadvantage of Porter’s differentiation strategy for Sammah’s Foodz is that it may not be hard for other competing businesses to also introduce the products Sammah’s stocks, which could therefore lead to decreased sales.

Answers could include:

• sustainability aims to meet the needs of the business while seeking to protect and preserve resources and the environment for the future. This includes finding ways to reduce waste and recycling of more resources such as water, energy and paper
• CHF can also measure their carbon footprint and investigate carbon offsets. Sustainable practices can differentiate businesses in the market and be used to promote the CHF in a positive light to build CHF's customer base
• CHF's employees will feel ethical by working in a sustainable business. Sustainable businesses have been shown to improve staff morale and increase staff productivity and reduce absenteeism
• one way that CHF can be more sustainable is for it to be efficient with resources, recycling supplies and reducing waste. CHF can promote the business more through its website and social media and not through other advertising methods such as print material.

Answers could include:

• control of quality may involve quality assurance (QA), quality improvement (QI) and quality control (QC)
• QA refers to a set of activities designed to make sure the development and maintenance process is adequate so that a system can meet its objectives, for example, CHF could use QA to prevent defects throughout the production process
• QI refers to the effort taken to increase efficiency, actions and procedures, with the purpose of achieving additional benefits for the business and its users, for example, CHF could use Total Quality Management (TQM) to improve its production process
• QC refers to the process of checking and reviewing processes at the end to determine if the requirements of the business are being met, for example, it ensures that the final product meets a defined set of quality criteria and meets the requirements of CHF's customers
• maintenance of quality is essential for CHF to maintain its brand. A brand is often associated with a particular level of quality and any lowering of quality or perception of quality would result in a loss of consumer confidence in the brand resulting in a decline in sales and profits.

Answers could include:

Profit ratio:

• shows the percentage of net sales
• in 2022, this was 12% which means for every ＄1 of sales earned, CHF had ＄0.12 profit
• in 2023, this increased to 14%, which means for every ＄1 of sales earned, CHF had ＄0.14 profit
• ratio has improved in 2023 by 2%.

Return on equity ratio:

• measures how much profit a business generates on capital invested
• in 2022, this was 8%. For every ＄1 of sales earned, CHF had invested ＄0.08 from capital
• in 2023, this increased to 11%. For every ＄1 of sales earned, CHF had invested ＄0.11 from capital
• ratio shows a 3% improvement in generating profits.

Expense ratio:

• shows the percentage of sales that is consumed by operating expenses
• in 2022, this was 60%. For every ＄1 of sales earned, CHF consumed ＄0.60 in operating expenses
• in 2023, this decreased to 55%. For every ＄1 of sales earned, CHF consumed ＄0.55 in operating expenses
• this ratio has improved by 5%, showing that CHF has reduced its expenses.

Answers could include:

Customs:

• when conducting business in another country such as Indonesia, CHF will need to consider cultural differences that may be presented
• cultural differences could include basic customs, mannerisms, and gestures. For example, if a salesperson for CHF approaches a meeting with knowledge of a customer's cultural background, then this salesperson's words, body language, and actions can all be adapted to better suit those of the customers in Indonesia
• understanding cultural differences and adapting to these differences will allow CHF to be better-liked by customers in Indonesia. This will enable CHF to grow their customer base, increase their sales and profits, and to operate successfully in Indonesia.

Business etiquette:

• the formality of address is an important consideration when dealing with colleagues and business partners from different countries. CHF can consider if team members in Indonesia prefer titles and surnames or being on a first name basis
• while it can vary across organisations, Asian countries such as Indonesia tend to use formal 'Mr/Ms Surname', while Australians and Americans tend to use first names
• CHF will need to be aware of business etiquette in the countries in which they choose to operate. This will allow CHF to operate successfully in Indonesia.