.The Apprentice.

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CHAPTER 21

3. MARKETING

3.1 What Is Meant By 'Marketing'?
- according to the Institude of Marketing, marketing is the management process that identifies, anticipates and supplies customer needs efficiently and profitably

3.2 The Marketing Mix
Product - anything offered for attention, acquisition, use or consumption
Place - outlets, geographic areas, and distribution channels
Promotion - advertising, publicity, sales promotion
Price - price levels, discounts, allowances, payment terms, credit policy

3.3 Product Issues
~Product definition
- core/generic product - benefit or problem solving service
- actual product - tangible product or intangible service that serves as the medium for receiving core products
- augmented/extended product - measures taken to help the customer put the actual product to use

~ Product positioning
- comparison with our competitors

3.4 Pricing Issues
Cost - the price must be high enough to make a profit
Customers - what are they willing to pay
Competition - comparison of prices with competitors
Corporate objectives

Pricing tactics:
- cost plus pricing - the cost per unit is calculated and then a mark-up added
- penetration pricing - a low price is set to gain market share
- perceived quality pricing - a high price is set to reflect an image of high quality
- price discrimination - different prices are set for the same product in different markets
- going rate pricing - prices are set to match competitors
- price skimming - high prices for new products are dropped to increase demand
- loss leaders - a product sold at a loss to attract customers
- captive product pricing - used when customers must buy 2 products. first is cheap, second is expensive

2009-08-22T00:50:00.000-07:00

CHAPTER 20

10. THE PURPOSE OF ORGANISATIONAL CONTROL

~safeguard company's assets - if assets are stolen or damaged, the company will have to spend money to replace them
~ efficiency - inefficient business practices are a waste of the company's money
~ prevent fraud - fraud means the loss of valuable resources belonging to the company/shareholders
~ prevent errors - errors can lead to losses in efficiency or a loss of assets

11. WHY CONTROLS IN SYSTEMS ARE IMPORTANT

Purchasing
~ Safeguard company's assets - ensuring that only goods that have been received are paid for and the goods are in good condition
~ Efficiency - ensuring the best price is negotiated before buying
~ Prevent fraud - preventing purchasing staff accepting payments from suppliers to persuade them to purchase from that supplier
~ Prevent errors - ensuring the correct amount is charged by suppliers and that all purchases are recorded

Sales
~ Safeguard company's assets - ensuring good are only sold to customers who are likely to pay
~ Efficiency - ensuring orders are processed promptly
~ Prevent fraud - ensuring there is no theft od cash from customers
~ Prevent errors - ensuring the correct quantity of goods is despatched and invoiced

Wages
~ Safeguard company's assets - ensuring that cash wages cannot be stolen
~ Efficiency - ensuring that people are only paid for overtime when necessary
~ Prevent fraud - ensuring that there are no 'ghost' employees

Cash
~ Safeguard company's assets - ensuring cash is kept safe from theft
~ Efficiency - ensuring cash is banked promptly so as to gain interest
~ Prevent fraud - ensuring employees do not claim for expenses not incurred
~ Prevent errors - ensuring the entries in th cash book are correct

Inventory
~ Safeguard company's assets - ensuring inventory is kept free from damage
~ Efficiency - ensuring inventory is only produced when it can be sold quickly
~ Prevent fraud - ensuring inventory cannot be stolen from employees
~ Prevent errors - ensuring costs of finished goods are calculated properly

Chapter 23

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1. The meaning of internal control and internal check

Internal control- Process designed and effected by management to provide reasonable assurance about the achievement of the entity;s objectives with regard to :
-reliability of financial reporting
-effectiveness and efficiency of operations
-compliance with applicable laws and regulations

Internal check - element of internal control, concerned with ensureing that no single task is executed from start to finish by only one person. Each individual's work is subject to an independent check by another person in the course of that other person's duties

Chapter 22

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1. The meaning of internal auditing and external auditing

Internal auditing- Independent activity, established by management to examine and evaluate the organisation's risk management process and systems of control and to make recommendations for the achievement of company objectives

External auditing- independent examination of evidence from which the financial statements are derived, to give the reader the truth and fairness of state of affairs which they disclose.

2. The purpose of internal and external audit

- A legal requirement to produce true and fair annual financial statements

2.1 Internal audit
-Part of organisational control of business.
-Ensure efficient and orderly running of the business

Role of internal auditor:
-Set corporate objectives
-Design and monitor performance measures for these objectives

Corporate governance:
-A properly functioning internal audit department is part of good corporate governance
-Enable management perform proper risk assessments

Function of internal audit in the context of corporate risk management:
-Manage basic data to identify risjs
-Identify techniques for priortising and managing risks
-Report on effectiveness of rish management solutions

Structure and operation of internal audit function
-Annually review the need for one
-Annually review its scrope of work
-Staffed with qualified experienced staff

Scope of internal audit:
-Review internal controls and financial reports
-Review management systems
-Carry out special management
-Conducting operational reviews

Limitations of internal audit:
-Only succeed if it is properly staffed and resourced
-If internal audit identify fraud, they may unwilling to disclose it for fear of the repercussions

Limitations can be reduced if an audit committee:
-Sets work agenda
-Receives interal audit reports
-Able to ensure the internal audit is properly resourced
-Has a"Voice" at main board level

Chapter 23 Internal Financial Control

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Chapter 23 Internal Financial Control

Part 1 The Meaning of Internal Control and Internal Check

Part 2 The Purpose of Internal Control
To help management achieve the entity's objectives, especially in terms of ensuring:
-The orderly and efficient conduct of the business
-The safeguarding of assets
-The prevention and detection of fraud and error
-The accuracy and completeness of the accounting records
-The timely preparation of reliable financial information

Why do companies need internal controls?
Internal controls are there to prevent risks occurring or to minimise the impact of risks. Even when controls are in place documents may still get lost of portable assets may go missing. The level and extent of internal controls required depend on what the risks are if such controls fail. It is particularly important that stringent controls exist where there are associated legal requirements.

Chapter 22 Internal and external audit

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Chapter 22 Internal and External Audit
Part 2 The Purpose of Internal and External Audit
2.1 Internal Audit

2.2 External Audit
-Purpose - to report his opinion on whether the financial statements give a true and fair view in accordance with an identified financial reporting framework.
-Secondary Objectives - Encourages the employees of the company to document their work properly and dissuade them from fraud as their work may be inspected by external auditors. Also to suggest improvements.

Advantages of an External Audit
-Disputes between management may be more easily settled.
-Major changes in ownership may be facilitated if past accounts contain an unqualified audit report.
-Applications to third parties for finance may be enhanced by audited accounts.
-The audit is likely to involve an in-depth examination of the business and so may enable the auditor to give more constructive advice to management on improving the efficiency of the business.

Disadvantages of an External Audit
-The audit fee.
-The audit involves the client's staff and management in giving time to providing information to the auditor. Professional auditors should therefore plan their audit carefully to minimise the disruption which their work will cause.

Part 3 The Difference Between Internal and External Audit

Internal auditing

role - advise management on whether the organisation has sound systems of internal controls to protect the organisation against loss.
legal basis - not a legal requirement. The combined code on corporate governance recommends that if a listed company does not have an internal audit department.
scope of work - determined by management. It covers all areas of the organisation, operational, financial
approach - increasingly risk-based; assess risk; evaluate systems of controls; test operation of systems; make recommendations for improvements
responsibility - to advise and make recommendations on internal control and corporate governance.

External auditing

role - provide an opinion to the shareholder on whether the financial statements give a true and fair view.
legal basis - legal requirement for large companies, public companies and many public bodies.
scope of work - determined by the auditor in order to carry out his statutory duty on report, financial focus.
approach - increasingly risk-based; test underlying transaction that form the basis of the financial statements.
responsibility - to form an opinion on whether the financial statements give a true and fair view.

Chapter 21 The Relationship of Accounting with Other Business Functions

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Chapter 21 The Relationship of Accounting with Other Business Functions
Part 2 Production
-plan and oversees the production of goods
-it liaises with the accounting departments:
cost measurement, allocation, absorption - measures quantities of materials and time used, cost allocated and absorbed to calculate production costs based on advice given.
budgeting - decide how many items of what type are to be produced. cost of producing will be determined by accounting and production department and incorporated into the overall budget.
cost v quality - discuss the features that can be included in products and the raw materials that should be used. discuss which better quality and features justif the extra costs and discuss how to maximise the quality and profit
inventory - liaise with the inventory section to ensure that there are sufficient raw materials in stock for the production that is planned.
Part 4 Service Provision
-Companies very often provide services to customers.

Charge-out rates
-This is the hourly rate which the company charges clients. It should be higher than salary, as it should include a share of overheads. However, if the charge-out rate is too high customers will not use the service.

Estimating Costs
-Problems arise in determining the amount of overhead to be included in the charge-out rate. Also, if the service takes longer to provide than expected, the company may not be able to pass on the extra cost.

Problems Measuring Benefits
-Market conditions may mean that the charge-out rate contains a very low profit element. The company may question whether it is worth carrying out these services. The problem is that the benefits are intangible and not easy no measure, but nevertheless real.
A company with effective service provision has happier customers that are more likely to buy from the company in future leading to lower selling costs. But it is hard to measure these benefits.

Chapter 20 Financial Systems and Procedures

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Chapter 20 Financial Systems and Procedures

Part 1 Terminology
System
a group of independent but interrelated elements comprising a unified whole.
a process for obtaining an objective.
Policy
a guiding principle
Procedure
a series of acts
a set sequence of steps
Guideline
a recommended approach for conducting a task
Part 2 Advantages of Having a Formal Procedure
all transaction will be recorded in the same way, and the required information will be recorded in the correct places.
The best practice, the most efficient way of recording transactions
staff can refer to the written procedures
new staff can be trained more quickly
auditors can follow transaction more easily
staff can record transactions more quickly and efficiently
transactions which have not followed the procedure, which could be errors or frauds, may be identified more easily.
Part 3 Designing Financial Procedures
Sales systems
objective - to record the value of sales to each customer and the amount outstanding to be collected.
outputs - an analysis of sales by data and product type. a report showing amounts owing from receivables and how long outstanding.
inputs - customers place orders by fax and by telephone
sequence of events : oder received --> goods despatched --> invoice sent to customer --> invoice sent to customer --> sale recorded in accounts --> payment received from customer --> outstanding amounts followed up
odering state of the system
objective - to receive and process orders quickly and accurately, to ensure that goods are only despatched where the amount charged will be collectable.
outputs - instruction to despatch department to despatch goods, instruction to accounting department to invoice (charge for) goods.
inputs - note of telephone call, fax
what could go wrong - details of orders may be lost, details of orders may not be passed on to despatch and/or invoicing, order may be processed from customer who is unwilling/unable to pay
Part 4 Procedures Manuals
companies will collate the formal procedures within each system into a procedure manual.
a good procedure manual will contain sufficient detail to enable staff to understand the procedures they should carry out with minimal supervision and verbal instruction
manual will normally contain a flowchart of each system. It enables an overview of the system to be easily gained.
the diagram will be accompanined by detailed narrative notes, explaining in words the docment flows and the checks to be performed at early stage.
procedure manual should be very specific as to who should perform each task, when and how frequently - this helps to ensure that staff fulfil their tasks on a timely basis and the controls performed by appropriate people
manual should included specimens of each document referred to.
Part 5 The Purchasing Cycle

Part 6 The Sales Cycle

Part 7 The Wages Cycle

Part 8 The Cash System
8.1 The Receipts System
-Cheques are received from credit customers. (recorded in the cash book and customer's personal account)
-Cashier pays the cheques into the company's bank account
-Controls must be in place to ensure that the cheque cannot be misappropriated before it is paid into the bank.
-Some Customers may pay money directly into the company's bank account.

8.2 The Payments System
-Companies pay their suppliers (usually monthly by cheque)
-A cheque requisition is prepared for each payment.
-Cheques for a large amount of money will usually require two signatories.

8.3 The Petty Cash System
-Companies will need to keep a certain amount of cash on hand to pay for small expenses. (Postage stamps, biscuits)
-A cheque will be made out to cash, to generate the initial cash for the system.
-As staff claim against the petty cash system, they complete vouchers.
-At regular intervals a further cheque is made out to cash to replenish the petty cash which has been spent. Supervisor then inspects.

Part 9 The Inventory System
-The production decides on the required inventory purchases.
-The goods are received and are stored in the raw materials store.
-When goods are required for production, a Materials Requisition Form is completed by the production manager.
-The goods are then made into 'Work in Progress' (Partially complete goods)
-Record is made of the quantity removed from inventory upon goods sold.
-Year-end - All inventory will be counted and valued.

Part 10 The Purpose of Organisational Control

Part 11 Why Controls in Systems are Important

Part 12 Automated Systems
-Computerised systems used by most of the organisation.
-Have following features:
a)Uniform processing of transactions
b)Lack of segregation of functions
c)Potential for data to be corrupted easily
d)Potential for increased management supervision

Part 13 A Comparison of Manual and Automated Systems
Manual System:
Advantages
-Low capital cost
-No computer experience required
-Easy to correct errors
-Ledgers are portable
-Can review transactions
Disadvantages
-Slower at performing calculations
-More calculation errors
-Analysis of information is more time-consuming
-Less easy to audit

Automated Systems:
Advantages
-Quicker
-Can perform complex calculation
-Few errors
-More security
-Easier to sort and analyse data
Disadvantages
-Capital cost
-Training cost
-Less easy to correct errors
-Systems can crash

Chapter 18 The Accounting Profession

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Chapter 18 The Accounting Profession

1. The history of accounting

Accounting records were used by ancient traders, farmers to control their assets, monitor their costs, collect payments and calculate earnings.
In 1494, Luca Pacioli (Italian Monk), codified existing bookkeeping practice.
Accounting increased in importance as the predominant form of business entity.
Due to separation of ownership and management, accountants were required to produce and interpret financial information to enable shareholders to make decisions.
Accounting standard were developed to make the comparison between different companies become easier.
The growth in computerisation saw a reduction in traditional bookkeeping work, and globalisation required advice on many areas in addition to accounting.
Today the accounting profession is a multimillion dollar industry, and gives clients advice on wide range of business issues.

2. The role of accounting within the business

Function- Business development
Financial information required- Past setup costs, expenses, revenues, in order to estimate for new project. Mix of fixed/ variable costs, in order to determine breakeven point.

Function- Sales
Financial information required- Credit history of, and types of, customers to establish whether a new customer is creditworthy. Price charged in the past and impact on quantity sold

Function- Production
Financial information required- Cost of labour, materials and overheads. COst of buying rather than making components.

Function- Marketing
Financial information required- Prices charged in past and by competitiors. Available budget. Costs of production,

Funtion- Human resources
Financial information required- Salaries, pay rises, training budget

Funtion- Strategy
Financial information required- Cash flow forecasts, budget, past information, profitability by product, trends in sales and profits.

3. The purpose of the accounting function

sales invoices

external and internal users
accounting department- recording in ledger
customers- recording in customers' ledger, paying for goods.

Ledgers

internal users
accounting department- preparing financial statements at the year end.

Financial statements

external users
shareholders- deciding whether to buy/ sell/ hold shares
lenders- deciding whether to lend
employees- assessing likelihood of redundancy, considering whether pay rise is reasonable.

Cost information

internal users
accounting department- calculating production costs, making decisons as to whether to make or buy components, determining prices.

Chapter 19 Accounting and Finance Functions

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Chapter 19 Accounting and Finance Functions

Part 1 The Formulation, Implementation and Control of Policy and Performance
The accounting function has an important role to play in helping management to:
-Formulate policy
-Implement policy
-Control performance

Planning is the establishment of objectives, and the formulation, evaluation and selection of the policies,
strategies, tactics and action required to achieve them.

A Budget is a plan expressed in quantitative (normally financial) terms for either the whole of a business or
for the various parts of a business for a specified period of time in the future.

Budgetary Control is the establishment of budgets relating the responsibilities of managers to the requirements of a policy, and the continuous comparison of actual with budgeted results.

Part 2 The accounting and reporting functions in business

The sequence of steps taken :
Transaction--->Day Books--->Ledger accounts--->Financial statements

main books of prime entry:
-Purchases Day Book
-Sales Day Book
-Cash Book
-Petty cash book
-Journal

The main financial statements produced each year are:
-Balance sheet : Showing assets owned and liabilities owed and how net seetes are financed
-Income statement : Showing revenues earned and costs incurred,leading to the net profit or loss for the year
-Cash flow statement : Summarising the cash receipts for the year and cash payments paid out to help readers of the accounts to understand the liquidity of the business

Part 3 The Management Accounting and Performance Management Functions
Management Accounting
- for internal use
- to aid planning, comtrolling and decision making
- no legal requirements
- management decide on the information that they require and the most useful way of presenting it
- financial and non-financial information
- time period is historical and forward-looking

Financial Accounting
- for external use
- to record the financial performance in a period and the financial position at the end of the period
- limited companies must produce financial accounts
- format and content of financial accounts must follow accounting standards and company law
- mostly financial information
- mainly a historical record

Examples of decision making that management accountants can help management with are:
- breakeven analysis
- key factor analysis
- pricing decisions
- investment appraisal

Budgetary control involves two elements:
~ Planning - setting of various budgets for the appropriate future period
~ Conrol - comparison of the plan in the form of the budget with the actual results achieved for the budget period

Part 6 Investment appraisal and financing viable investments

Investment appraisal : long-term investment decisions

Advantages of issuing new ordinary shares:
dividens can be suspended if profits are low, whereas interest payments have to be paid each year.
bank will typically require security on the company's assets before it will advance a loan
Advantages of raising loan finance:
Interest payments are allowable against tax, whereas dividend payment are not an allowable deduction against tax.
No charge is required in the ownership of the company, which is governed by who owns the shares of the company.
Part 7 Management of working capital
Company must also decide on the appropriate level of investment in short term net assests, i.e.
Inventory
advantage of large balance - customers are happy since they can be immediately provided with good
advantage of small balance - low holding costs. Less risk of obsolescence costs
Trade receivables
advantage of large balance - customers are happy since they like credit.
advantage of small balance - less risk of bad debts. good for cash flow.
Cash
advantage of large balance - creditors are happy since bills can be paid promptly.
advantage of small balance - more can be invested elsewhere to earn profits.
Trade payables
advantage of large balance - perserves your own cash
advantage of small balance - suppliers are happy and may offer discounts

Chapter 17 Law and Regulation Governing Accounting

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Chapter 17 Law and Regulation Governing Accounting

Part 1 Authorities to Whom Companies are Accountable
Accountability- state of being accountable,liable or answerable for actions or conduct, of being responsible for actions or ommisions

Companies are accountable to various bodies

Almost every countries will be a government department set up to oversee regulation and accounts of companies.

UK- Companies house
S'pore-ACRA
M'sia - Company Commission of Malaysia
HongKong- Companies registry
Jamaica- The Companies Office of Jamaica

Companies required to submit financial statements to these bodies so that inspection can be made
Also, submit documents.

Part 2 Legislation Governing Financial Statements
-Most countries have a law which governs preparation of financial statements
-Name of law and contents varies from country to country
-Companies legislation in many commanwealth country is based on UK Companies Act.

UK- Companies act 1985 and 1989
S'pore-Companies act (cap 50) and various companies (amendment) acts
M'sia- Companies act 1965
HK- Hong Kong companies ordinance 1984
Jamaica- Companies act 2004

Part 3 Requirements for Financial Statements
-The Companies Act (UK) - Financial statements are prepared which give a 'true and fair' view.
-Financial Statements will generally be True and Fair if:
-follow accounting standards
-follow generally-accepted best practice
-have information of sufficient quantity and quality to satisfy the reasonable expectations of the users.
-Sufficient quantity indicates that the information must be adequately detailed.
-Sufficient quality means that the information should be reasonable accurate and 'not materially misstated'
-Materially misstated means that the financial statements may have misstatements (errors) but they should not be large enough to be important to anyone reading the accounts.
-Companies have to maintain proper accounting records which are sufficient to show and explain the transactions.
-The content of the records is not defined but a record of transactions, assets and liabilities would be required as a minimum.

Part 4 Responsibility for Financial Records
-Under companies legislation, directors are responsible for producing financial statements which give a true and fair view.
-This is delegated within the company to the finance director (FD) or Chief Financial Officer (CFO). The financial reporting section within the accounting department will assist the FD
- The trial balance will be prepared following input from all sections
-The sales ledger function will estimate which debts are unlikely to be recovered
- The non-current assets section will estimate depreciation rates.
-The inventory section will value inventory at the year end
-Managers outside the accounting department, such as sales, may give input into estimates used.
-If the FD does not himself have the skills to prepare the financial statements, an accounting firm may be asked to provide assistance.

Part 5 Consequences of Compliance Failure

Part 6 Bodies Governing the Accounting Function

Part 7 The Role of the IASCF
The IASCF is the parent entity of the
~ IASB
~ SAC - consults with users of accounting standards and the accounting profession and advises the IASB
~ IFRIC - gives guidance on issues that are not covered in an accounting standard or where the guidance is conflicting

Part 8 The Role of IASB
Aims
- to develop a single set of high quality, understandable and enforceable global accounting standards
- to co-operate with national accounting standard-setters

Chapter 11 Social and Technological Factors

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Chapter 11 Social and Technological Factors

Part 1 Demographic and Social Trends

1.1 Environmental Analysis
Key social and demographic issues include:
- population - size, location, density, composition
- wealth - income, distribution
- education and training
- health
- social structure, attitudes, values and tastes

1.2 Demographic Trends
~ Population Size
- growing population results in a growing market
- population growth or decline is the results of a combination of factors including birth rates, death rates, immigration and emigration

~ Population Composition
- the relative sizes of birth and death rates will change the age composition of the population

~ Population Location

~ Wealth
- economic growth often results in higher disposable income with the knock an effect of greater demand for porducts

~ Education
- key driver of economic growth

~ Health

1.3 Social Trends
~ Social Structure
- many countries are finding the demand for housing growing faster than the population

~ Values
- greater social awareness could spell disaster in the future for those firms unwilling to embrace this cultural shift

~ Attitudes
- willingness to seek compensation from organisations for alleged wrongs
- people are more comfortable with computers and using the internet

~ Tastes
- changes in tastes and fashions can have a damaging on organisations that fail to anticipate the changes

1.4 Government Policy
~ Population Structure
- governments of countrues wtih low birth rates often introduce tax advantages and other financial incentives to encourage women to have more children
- governments in countries with rapidly rising populations often put in place policies to discourage large families

~ Housing
- increasing demand for new housing has resulted the governments setting out new developements, creating further demand for builders

~ Employment

~ Health
- some governments have taken steps to improve the nutritional value of school meals with obvious implications for the suppliers of those meals

Chapter 12 Competitive Factors

2009-08-07T07:24:00.000-07:00

Chapter 12 Competitive Factors

Part 1 Competitive Advantage

1.1 Environmental Analysis

Whether the firm has a sustainable competitive advantage will be analysed in three steps:
the different ways a firm can achieve a competitive advantage
the main competitive forces in an industry
how different activities and departments within the firm contribute to its competitiveness
1.2 Competitive Advantage

Michael Porter stated that a firm wishing to obtain a competitive advantage over its rivals is faced with two choices.
cost leadership versus differentiation - lower cost than its rivals for similar products and services, or offering a better product than competitiors
degree of focus - scope of the area in which the company wishes to obtain competitive advantage
Lower cost, Broad target - Cost leadership
Differentiation, Broad target - Differentiation
Lower cost, Narrow target - Cost focus
Differentiation, Narrow target - Differentiation focus

Part 2 Porter's Five Forces Analysis

2.1 Introduction
-Porter's 5 forces approach looks in detail at the firm's competitive environment by analysing five forces

2.2 Porter's Five Forces Model
Competitive Rivalry
High competitive rivalry will put pressure on firms to cut prices and/or improve quality to retain customers. (Reduced Margins)

The intensity of existing competition depends on:
-Number and relative strength of competitors
-Rate of growth (of the market)
-High/Low fixed costs
-Easy switching for buyers
-High/Low exit barrier
-Need of strategic

Threat of Entry
New entrants into a market will bring extra capacity and intensify competition.

Six major sources of barriers to entry:
-Economies of scale
-Product differentiation
-Capital Requirements
-Switching costs
-Access ti distribution channels
-Cost advantages independent of scale

Threat of Substitute Products
This threat is across industries (e.g. rail travel versus bus travel versus private car) or within an industry (e.g long-life milk as a substitute for delivered fresh milk).

Bargaining Power of Customers
Powerful customers can force price cuts and/or quality improvements. Either way margins are eroded.

Factors:
-Buyer's purchases are a high proportion of the supplier's total business.
-Buyer makes a low profit
-Quality of purchases is unimportant or delivery timing is irrelevant
-Products have been strongly differentiated with good brand image

Bargaining Power of Suppliers
The power of suppliers to charge higher prices will be influenced by:
-The degree to which switching costs apply and substitutes are available
-The presence of one or two dominant suppliers controlling prices
-The extent to which products offered have a uniqueness of brand, technical performance or design not available elsewhere.

Part 3 Porter's Value Chain

-Porter developed his value chain to determine whether and how a firm's activities contribute towards its competitive advantage

3.2 Value Chain
(a) Primary Activities
1. Inbound logistics :Receiving,storing and handling raw materials inputs.
2.Operations: Transformation of raw materials into finished goods and services
3.Outbound logistics : Storing,Distributing and delivering finished goods to custmers
4.Marketing and sales : Market research + 4Ps
5. Service : All activities occur after point of sale.

(b) Supporting activities
1. Firm infrastructure : How firm organised
2. Techonology Development :How firm uses technology
3. Human resources development : How people contribute to competitive advantage
4. Procurement : Purchasing but not just limited materials

3.3 How different departments contribute to competitive advantage

(1) Purchasing:
Cost advantage- sourcing cheaper materials, bulk discounts
Quality advantage - sourcing high quality materials

(2) Production:
Cost advantage - Mass production lines, standardisation,Employing workers just above minimum wage
Quality advantages- Using better quality materials, more quality control procedures,employing high-skilled stagg, flexible manufacturing system

(3) Marketing:
Cost advantages- word-of-mouth promotion, sell direct to cut distribution costs
Quality advantages- Market research can help tailor products to meet customer needs,large promotional budgets,sponsorship

(4) Service:
Cost advantages- Outsourcing, not offering service provision
Quality advantages- High skilled staff

Chapter 10 - Macroeconomic Factors

2009-08-03T05:21:00.000-07:00

Chapter 10 Macroeconomic Factors

Part 1 Defining Macroeconomic Policy

-the study of how society allocates scarce resources, which have alternative uses between competing ends
-The study of wealth creation

Microeconomics
-Study of economic behaviour of inidividual consumers,firms and industries

Macroeconomics
-Aggregrate behaviour and study of sum of individual economic decisions

1.1 Environmental Analysis

1.2 Defining Macroeconomics

1.3 Macroeconomic Policy

Four macroeconomic policy objectives
-Economic growth
-Inflation
-Unemployment
-Balance of payments

Part 2 The Level of Business Activity in the Economy

2.1 Introduction
While the level of activity within a particular industry will depend on specific PEST issues, the overall level of activity in an economy can be anticipated and explained by reference to generic (mainly economic) factors.

2.2 Factors that Influence the Level of Business Activity
Factors that influence the overall level of business activity include the following:

Confidence
-Greater consumer confidence - Higher Demand
-Higher business confidence - Higher levels of investment, new firms being set up by entrepreneurs
-Confidence can be reduced by a wide range of factors - Political instability, disasters, likelihood of unemployment and high inflation.

Aggregate Demand
-The total demand for a country's output and consists of Consumer Spending (C) + Investment by firms (I) + Government Spending (G) + Demand from exports (X) - Imports (M)
-Higher demand - Firms increases output (to meet demand)
-Higher demand - Inflationary pressure

Capital
-Greater availability of finance - Higher levels of investments
-Lower interest rates - Capital cheaper
-Government policy on cheap loans

Use of Resources
-New tech and more efficient working - improve productivity and lower costs
-Advances in levels of education - More productive workforce

Government Policy
-Governments can increase or decrease the level of aggregate demand through fiscal policy
-Investment in the infrastructure of the economy can attract investment
Exchange Rate Movements
-A strengthening currency will make a country's exports more expensive and will thus dampen demand for those exports. Imports, on the other hand will get cheaper

2.3 Trade Cycle
Many economies exhibit fluctuations in economic activity over time with an underlying trend of output growth

Part 3 The Impact of Economic Issues

3.1 Stagnation and Economic Growth

Growth Should result in:
-More goods being demanded and produced
-People earn more and can afford more goods
-More people should have jobs

Growth and it's problems:
-Is economic growth fast enough to keep up with population growth?
-Growth rates have to exceed inflation rates for benefits to arise.
-Growth amy be in 'demerit' goods, such as illegal drugs.
-Growth may be at the expense of the environment or through exploitation of the poor.
-The gap between rich and poor may grow, as the benefits from growth are not evenly distributed.
-Measurement of growth is difficult given the black market and goods that are excluded from national income calculations.
-Rapid growth = rising incomes, and this often 'sucks in' imports, worsening the balance of trade, rahter than benefiting domestic producers.

3.2 Inflation
Most governments want stable prices and low inflation. The main reasons:
-Inflation causes uncertainty and stifles business investment.
-Not all incomes rise in line with inflation
-In extreme cases of inflation, the function of money may break down, resulting in civil unrest and even war.
-Inflation distorts the working of the price mechanism and is thus a market imperfection.

Note that high inflation can affect savings in diff ways
-People who save to spend later (a "transactions motive") will save less to avoid the purchasing power of their money being eroded.
-People who save in case something bad happens (a 'precautionary motive') will save more due to the uncertainty inflation creates.

3.3 Unemployment
Mass Unemployment is a problem because:
-The government has to pay out benefits to the unemployed at a time when its tax receipts are low.
-Unemployment has been linked to a rise in crime, poor health and a breakdown in family relationships.
-Unemployment is a waste of human resources and can restrict economic growth.

3.4 Balance of Payments
To run a persistent surplus or deficit can have negative macroeconomic effects
-A long-term trade deficit has to be financed. The financing costs act as a major drain on the productive capacity of the economy.
-A long-term trade surplus can cause significant inflationary pressures, leading ultimately to a loss in international confidence in the economy and a lack of international competitiveness.

Part 5 Achieving Policy Objectives

5.1 Growth
- cutting interest rates - part of Keynesian demand management or monetarism
- running a budget deficit - Keynesian response to a recession. Monetarism argues that the way the government finances the increase will have a negative effect elsewhere, thus reducing its effectiveness
- supply side policies - increasing the availibility of skilled labour
- other - regional developement grants and tax incentives to boost investment. protectionist measures to reduce imports. creating a stable economy to boost confidence

5.2 Unemployment
- cyclical unemployment - aggregate demand in the economy is too small to create employment opportunities for all those willing and able to work
- frictional unemployment - people who are short-term unemplyoed as they move from one job to another
- structural and technological unemployment - boosting aggregate demand is likely to have little impact on structural unemployment
- seasonal unemployment - demand for some goods and services are highly seasonal which creates highly seasonal demand for workers
- real wage unemployment - occur in industries that are highly unionised. by keeping wages artificially high by threat, the number of people employed is reduced

5.3 Inflation
- demand-pull inflation - if demand for goods and services is growing faster than the ability of the economy to suppy these goods and sevices, prices will increase
- cost-push inflation - underlying cost of factors of production increases, output prices increases
- imported inflation - weakening of the national currency will increase the cost of imports
- monetary inflation - over expansion o money supply. money supply increases, purchasing power increases, demand for goods and services increases
- expectations effect - if anticipated levels of inflation are built into wage negotiations and pricing decisions then it is likely that the expected rate of inflation will arise

5.4 Balance of Payments
- balance of payment deficits - net outflow of funds from the country.
strategies to reduce balance of payments deficits:
- expenditure-reducing strategies - reducing overall demand in the domestic economy a government will be able to reduce demand for imports
- increasing interest rates - will reduce demand for exports by domestic consumers and firms
- expenditure-switching strategies - the government seeks to change expenditure pattern of consumers by encouraging expenditure on domestically-produced rather than imported goods
- lower the exchange rate - making imports more expensive and exports cheaper to an overseas buyer

Chapter 9 - Political and Legal Factors

2009-08-03T05:19:00.000-07:00

Chapter 9 Political and Legal Factors
Part 1 Introduction to PEST analysis
1.1 Environmental Analysis
Firms will carry out external analysis as part of their startegic planning.
PESTL analysis- where legal is separated from political
STEP analysis- PEST reordered!
PESTLE analysis- political, economic, social, technical, legal, and ecological/environmental.
Social/Cultural environment - population demographics, social mobility, income distribution, lifestyle changes, attitudes to work and leisure, levels of education and consumerism.
Legal environment - taxation, employment law, monopolies legislation and environmental protection laws.
Economic environment - interest rates, inflation, business cycles, unemployment, disposable income and energy availability and cost.
Political environment - taxation policy, government stability and foregin trade regulations,
Technological environment - influence by government spending on research, new discoveries and development, government and industry focus of technological effort, speed of technological transfer and rates of obsolescence.
Ecological environment - ways in which the organisation can produce its goods or services with the minimum environment damage.
Part 2 Political Systems and Government Policy
2.1 Political Systems
A political system is a complete set of
institutions
political organisations
interest groups
relationship between institution
political norms and rules that govern their functions
Firm have to take account of political system at three levels
Global- WTO, EU legislation
National- national government policy, national legislation, government department
Local- local government departments, councils
2.2 Government Policy
Government can influence firms throught legislation and government policy decisions.
housing
crime
education
defence
healthcare
engergy
environmental
farming
town planning
domestic
foreign
2.3 Legislation
Organisations need to ensure that they comply with legislation. Failure to do so could result in fires, closure, bad publicity and loss of customers
KEY AREAS of legislation that affect all firms include
protecting employee rights
protecting consumers
protecting the environment
health and safety
data protection
2.4 Source of Legal Authority
Supra-national
United Nations resolutions
International Court of Justice
Other international agreements that apply to signatories
European Parliament
European Courtis
National
National Government through Acts of Parliament
Senior Courts
Other major courts through the principles of case law and the setting of precedents
Regional
Regional/ federal Government
Local councils can issue bye-laws in many countries
Part 3 The Principles of Data Protection and Security

3.1 Data Protection and Data Security
Data protection - pretect individuals against misuse of information about them held by organisations
easy interrogation of large files
speed of response
computer system can be cross-linked to obtain personal profiles
an individual's records can be selected easily through te search facilities
Data security - keep data safe from various hazard that could destroy or compromise it.
phyical risk- impact on the physical environment in which system exists
human risk- access is gained to the system by an unauthorised user, either physically or remotely
3.2 The Main Principles of Data Protection
Personal data shall be obtained and processed fairly and lawfully and inparticular shall not be processed.
Personal data shall be obtained for one or more specified and lawful purposes, and shall not be further processed in any manner incompatible with those purposes.
Personal data shall be adequate, relevant and not excessive in relation to the purpose or purposes of which it is processed.
Personal data shall be accurate and kept up-tp-date.
Personal data should not be kept for longer than is necessary
Personal data shall be processed in accordance with the rights of data subject
Data user is responsible for the security and protection of data against unauthorised access, alteration, destruction, disclosure or accidental loss.

3.3 Data Security

(a)Physical damage:
-fire
-flooding
-terrorist acts
-power failure
(b)Human damage:
-human interference
-vandalism
(c)Operational problems:
-Program bugs
-User operational error
(d) Data corruption
-viruses
-hackers
(e) Data theft
-fraud
-Loss of confidentiality

4.2 Health and Safety in the Workplace
law puts responsibility for health and safety on BOTH employer and employee
Employer's responsibilities
-Safe ways in and out of place of work
-Safe working environment
-Safe equipment and procedures
-Arrangement for the safe use,handling,storage and transport of articles
-Adequate investigation of accidents

Employees' responsibilities
-responsible for his or her own healthy and safety
-Consider health and safety of other people
-Co-operate with anyone carrying out duties under the act

Chapter 8 - Information Technology and Information Systems in Business

2009-07-28T03:15:00.000-07:00

Chapter 8 Information Technology and Information Systems
Part 1 Information Technology and INformation Systems
Data consists of numbers, letters, symbols, raw facts, events, and transactions, which have been recorded but not yet processed in a form that is suitable for making decisions

Data can also be classified as:
- continuous
- discrete
- primary
- secondary
- qualitative
- quantitative

Information is data that has been processed in such a way that it has a meaning to the person who receives it, who may then use it to improve the quality of decision-making

Managers require information to:
- provide records, both current and historical
- to analyse what is happening within the business
- to provide the basis of decision making in the short-term and long-term
- to monitor the performance of the business by comparing actual results with plans and forecasts

Data may be transformed into information by:
- bringing related pieces of data together
- summarising data
- basic processing of data
- tabulation and diagrammatic techniques
- statistical analysis
- financial analysis

1.1 Deploying Information Systems in the Organisation
Information systems produce output for:
- planning
- recording and processing transactions
- monitoring and measuring performance
- controlling
- decision making

1.2 The Advantages Computerizing will Bring to a Company
- speed
- accuracy
- volume
- complexity
- presentation
- cost
- judgement
Part 2 The Qualities of Information
Accurate - So that decision maker can reply on
Complete- More compelete, More reliable
Cost - Not cost more to obtain than the benefit derived from it
Understandable - Readily acted upon
Relevant - Information provided should concentrate on the essentials and ignore trivia
Adaptable - Information should be tailored to the needs and level of understanding
Timely - Information should up-to-date
Easy to use - Clearly presented and sent using right medium
Part 3 Management Structure and Information Requirements
Strategic level:
-Requires information from internal and external sources.
-Plan long term strategies of organisation

Tactical level:
-Requires information and instructions from strategic level together with routine and regular quantitative information from operational level of management.
-Information is in summarized form.

Operational level:
-Requires information and instructions from tactical level.
-Concerned with day-to-day performance of tasks.
3.1 The Type of Information Used at Each Level of the Organisation
Strategic :
-Expected government policy
-Overall profitability
-Competitor analysis
-Profitability of divisions
-Future market prospects
-Availability and cost of capital
-Total cash needs
-Resource levels
-Capital equipment requirements

Tactical :
- productivity measurements
-budgetary control reports
-Variance analysis
-Cash flow forecast
-short term purchasing requirements
-Labour turnover statistics

Operational:
-Employee hours worked
-Raw materials input to a production process
-Hours spent on each individual job
-Reject rate
-Stock levels
Part 4 Sources of Information
4.1 Internal/External Sources of Information
Data and Information Systems
Internal data/information (activities or transactions performed within the organisation)
-Administrative tasks
-The production of products and services
-The sale of those products
External data/information (come from customers, suppliers and potential suppliers)
-Available from a wide range of sources
4.2 Information from Internal/External Sources
Internal Sources (the amount of information available within an information system will vary from one organization to another)
-Customer records
-Employee records
-Stock Information
-Product or service details and specifications
-Production Information
-Sales and purchase information
-General information and reference books

Managers may also receive info from informal systems which include formal and informal meetings, face-to face exchanges, telephone conversations…etc
External Sources (an organisation's files will be full of information received from customers and suppliers)
-Invoices
-Letters
-Stock price quotations
-Catalogues
-Advertisements
Systems for obtaining external information
-Market research and analysis of competitors’ prices
-Legal and regulatory update information: Changes to company law, tax law, employment law, accounting standards, environmental protection, etc.
-Government data on economic and financial conditions
-Research intelligence: information about technology changes or new discoveries that may have an impact on the organization
-Other forms of market intelligence: for example the formal collection of feedback forms from customers, salesmen and others ‘in the field’.
Part 5 Information Systems Used Within an Organisation
Businesses need various systems to process, analyse, and store information. Information systems are also used to support decision making within an organisation.
Operational Planning
Programmable decisions with specific inputs and outputs.
The Transaction Processing System (TPS) is usually used
Tactical Planning
Use a variety of data some different sources
There is great emphasis on exception reporting
Management System (MIS) is usually used
Strategic Planning
Varied information requirements
Management System (MIS) and Executive Information Systems (EIS) is usually used
There are 5 main types of information processing systems:
Transaction Processing System
Management Information System
Decision Support System
Executive Information System
Expert System
Transaction Processing System
The TPS is mainly used:
To record all daily routine transactions in an organisation
By operational level managers
As a source of summary data fed to the Decision Support System
The following are examples of the TPS and its role in the organisation:
Sales/marketing systems – they record sales transactions and provide details on marketing and promotional activities
Manufacturing production system- they record details of purchases, production and shipping of the goods
Finance/accounting systems- maintenance of financial data in an organisation
Human resources- maintain details of employees
Management Information System
The MIS is mainly used:
To convert data from internal and external sources into information that is relevant to managers at all levels
To enable managers to make timely and effective decisions for planning and controlling the activities for which they are responsible
Extensively by operational users
The following are examples of the MIS and its role in the organisation:
Product information- online categorised information at a keystroke
Sales ledger- information relating to customer turnover and payment records. Trend analysis to identify customers whose business is growing or declining
Supplier information- information such as amount spent and reliability indicators to use when negotiating and making strategic decisions
Within most MIS there are four system types:
Database systems
Direct control systems
Enquiry systems
Support systems
Decision Support System (DSS)
An integrated, computer based, user machine system that provides information for supporting operations and decision-making functions
Used to assist tactical or management level decision makers
There is no typical system but it really does depend on the organisation’s needs
The following are the roles of the DSS in the organisation:
Supports structured decision making
Provides online access to TPS to obtain summary data
May provide external information on competitors
Basic statistical analysis normally found in a DSS
Executive Information System (EIS)
A system for total business modelling
Monitors internal and external environment
The following are the examples of use of the EIS in the organisation:
Company performance data on sales, production, earnings, budgets and forecasts
Internal communications such as personal correspondence, reports and meetings
Environmental scanning for news on government regulations, competition et cetera.
Expert System (ES)
A form of DSS that allows users to benefit from expert knowledge and information
Not part of normal “hierarchy” of information systems but provides useful information to any management level
Uses a knowledge base from which an inference engine determines solutions to user questions
The following are examples of use of the ES in the organisation:
Process loan applications
Legal advice
Forecasting of economic or financial developments or of market and customer behaviour
Part 6 Spreadsheet and Database Software Application
6.1 Spreadsheets
- to analyse data and sort list items, not for long-term storage of raw data.
- used for "crunching" numbers and storage of single list items
- include graphing fucntions that allow for quick reporting and analysis of data

ADVANTAGES:
- user-friendly
- require training to get started
- most data managers are familiar with them

DISADVANTAGES:
- have to re-copy data over and over again to maintain it in separate data files.
- inability to efficiently identify data errors
- lack detailed sorting and querying abilities
- can be share violations among users wishing to view or change data at the same time
- restricted to a finite number of records, require a large amount of hard-drive space for data storage
6.2 Databases
- store large amounts of raw data
- for two or more user share information

ADVANTAGES
- ease of reporting and sharing data
- require little or no duplication of data between information tables
- changes made to the data do not corrupt the programming
- offer better security to restrict user from accessing privileged information and from changing coded infromation in the programming

DISADVANTAGES
- requires user to learn a new system
- requires a greater investment in training and software
- initial time and cost of migrating all of the data into a new database system

Chapter 16 - Governance and Social Responsibility

2009-07-27T04:15:00.000-07:00

Chapter 16 Governance and Social Responsibility

Part 1 The Separation of Ownership and Control

The separation of ownership and control refers to the situation in a company where the people who own the company (eg: shareholders) may not be the same people as those who control the company. (eg: the board of directors)

Reasons:

Specialist management can run the business better than those who own the business
The original shareholders cannot personally contribute all the capital needed to run the business, so they have to bring in external capital from people whoa re not interested in the day-to-day operations

Win-win situation for both parties because:

Managers can get on with full-time management of the business
Shareholders are interested in the return from their investment and do not have the skills, time or the inclination to concern themselves with day-to-day matters

However, the separation of ownership and control will lead to the agency problem in a company.

The Agency Problem

- Directors are not operating in the company's best interests but to their own benefits. However, this can be solved by aligning the interests of the directors and the interests of the company.

Part 2 The Meaning of Corporate Governance

Corporate Governance is the set of processes and policies by which a company is directed, administered and controlled.

Stewardship Theory

Steward: Someone who manages property or other affairs of someone else

Some approaches to good governance view the management of an organisation as the stewards of its assets, charge with their employment and deployment in ways consistence with the overall strategy with the overall strategy of the organisation. With this approach, power is seen to be vested in the stewards, that is the executive managers.

Agency Theory

Agency: The state of serving as an official and authorized delegate/agent

Another approach to governance is agency theory. This takes the stance that, rather than acting as stewards, management will act in an agency capacity, seeking to service their own interest and looking after the performance of the company only where its goals coincident with their own.

Stakeholder Theory

Effectively stakeholder theory is a development of the notion of stewardship, stating that management has a duty of care, not just to the owners of the company in terms of maximizing shareholder value, but also to the wider community of interest, or stakeholder.

Governance Principles

1. To minimize risk especially financial risk, legal and reputation-al risk by requiring compliance with accepted good practice in the jurisdiction in question and ensuring appropriate system of financial control are in place, in particular system for monitoring risk, financial control and compliance with the law.

2. To ensure adherence to and satisfaction of the strategic objectives of the organisation, thus aiding effective management.

3. To fulfill responsibilities to all stakeholders and to minimize potential conflict of interest between the owners, managers, and wider stakeholder community. However, define and to treat each category fairly.

4. To establish clear accountability at senior levels within an organisation.

5. To maintain the independence of those who scrutinize the behaviour of the organisation and its senior executive managers. Independence is particularly important for non-executive directors and internal and external auditors.

6. To provide accurate and timely reporting of trustworthy/independent financial and operational data to both the management and the owners of the organisation to give them a true and balance picture of what's happening in an organisation.

7. To encourage more proactive involvement of owners in the effective management of the organisation through recognizing their responsibilities of oversight and input to decision making processes via voting or other mechanism.

8. To promote integrity that is straight toward dealing completeness.

Part 3 The Meaning of Corporate Social Responsibility

- a company should be sensitive to the needs and wants of all of the stakeholders in its business operations, not just the shareholders
- sustainable developement - companies should make decisions based not only on financial factors, but also on the social and environmental consequences of their actions

- the WBCSD see CSR fitting into overall corporate responsibility as follows:
Corporate Responsibility (sustainable developement)
~ Corporate Financial Reaponsibility
~ Corporate Environmental Responsibility
~ Corporate Social Responsibility

- key issues in CSR debate are employee rights, enrironmental protection, supplier relations, and community involvement

Part 4 The Importance of CSR to a Company's Success

- a coherent CSR strategy can offer business benefits by enabling a company to:
~ monitor changing social expectations
~ manage operational risks
~ identify new market opportunities
~ retain key employees

Part 5 The Impact of Corporate Governance and CSR on the Organisation
Enhanced performance reporting methods including the following:

The balanced scorecard
financial perspective- reports the traditional information of profits, capital employed, etc.
customer perspective- reports how well customer wants have been satisfied.
internal perspective- reports on the internal efficiency of the business
innovation and learning perspective- reports on the development of new products and services
Triple bottom line reporting
People
Planet
Profit
Financial outcomes
Environmental performances
Social performances
Part 6 Non-Executive Directors (NEDs)
not part of employee of the company but they do take part in decision making
do not take part in day-to-day running of the company
balancing influences and play a key role in reducing conflict of interest between management and shareholders
provide assurance to shareholder that management is acting in the interest of the organisation.
a) STRATEGY: NED should contribute to and challenge the direction of, strategy
b) PERFORMANCE: NED should scrutinise the performance of management in meeting goal and objective and monitor the reporting of performances
c) RISK: NED should satisfy themselves that financial informantion is accurate and that financial controls and systems of risk management are robust.
d) DIRECTOR AND MANAGER: NED are responsible for determining appropriate levels of remuneration for executive, and are key figures in the appointment and removal of the senior manager and procession planning.
Part 7
Part 8
Part 9 Public Oversight of Corporate Governance
Public has a
- "right to know" how such company is being governed
- right to be involved in the governance process

Public can oversight via publication by company of their annual report and accounts.
By law, company required to send a copy to shareholders.

Important matters required to be disclosed in Annual report
-Eg: the audit committee and remuneration must describe their role and actions during the year
Part 10 Stakeholders Needs Analysis
To identify stakeholder needs, possible methods are :
(a) questionnaires
(b)Focus groups
(c) Direct interviews or interviews with representatives

Chapter 15 - Business Ethics and Ethical Behaviour

2009-07-21T05:26:00.000-07:00

Chapter 15 Business Ethics and Ethical Behaviour
Part 1 Definition of Business Ethics
- ethics is the analysis of right and wrong, and associated responsibility
- business ethics is the application of ethical values to business behaviour

Approaches to Deciding What is 'Right' or 'Wrong'?
- the consequences
- the motivation of the parties concerned
- guiding principles
- duties
- key values

Ethics can be divided into 3 areas:
- meta-ethics - the study of what is ethical behaviour
- normative ethics - how to arrive at practical standards of ethical behaviour
- applied ethics - applying ethical ideas to specific controversial issues

Part 2 Why Business Ethics is Important
For The Organisation:
- good ethics should be seen as a driver of profitability rather than a burden on business
- an ethical framework is part of good corporate governance and suggests a well-run business
- investors are reassured about the company's approach to risk management
- employees will be motivated in the knowledge that they operate in an environment of good ethical corporate behaviour

For The Individual:
- consumer and employee expectations have evolved over recent years
- consumers may choose to purchase ethical items, even if they are not the cheapest
- employees will not blindly accept orders to act in a manner that they personally believe to be unethical

Part 3 How Can the Ethics of a Business Decision be Judged?
Ethics goes beyond the legal requirement of a business.

Organizations can draft sets of criteria to be used in making difficult ethical decisions.
- Is it legal?
- Is it contrary to our company’s adopted code of ethics
- Is it contrary to any other published official code of ethics
- Would you mind other people knowing what you have decided?
- Who is affected by this decision? Would they regard the decision as fair?

Each company must identify its own set of core values which can be developed into code of ethics.
Strong visible support for the code from the BOD is essential if the code is to be effective.

Part 4 How is a Profession Distinguished from Other Occupations?
A profession is characterized by the following factors:
- mastering of specialized skills during a period of training
- governance by a professional association
- compliance with an ethical code
- a process of certification before being allowed to practices

The role of professional bodies in ensuring that their members possess adequate insurance so that members of the public can successfully sue the professional if they are harmed by the professional’s negligence.

Part 5 The Accountant's Role in Promoting Ethical Behaviour
In most business meetings and Board of directors, it is only the professional accountant who belongs to a profession and therefore has a duty to act in the public interest as well as in the interests of his employer and the shareholders.
There are a few ethical dilemmas which can be found throughout all aspects of business operations
Accounting Issues:
- Creative accounting to boost or suppress reported profits.
- Directors' pay arrangements
- Bribes
- Insider Trading
Production Issues:
- Production of guns, pornography, tobacco...etc
- Effects the production processes have on the environment
- Testing products on animals
Sales and Marketing Issues:
- Price fixing and anti-competitive behaviour
-Target advertising at children (overpricing during Christmas)
- Advertising by junk mail or spam mail

Part 6 Codes of Ethics and Codes of Conduct
-Most companies have formulate a set of internal policies and instructing employees to follow them.
-Ethics officers (also called compliance officer) are appointed to monitor the application of the policies and able to discuss ethical dilemmas with employees who approach them
-The policies can be Broad Generalizations (a corporate ethics statement) or can contain Specific detailed rules (a corporate ethics code)

Part 7 IFAC and ACCA Codes of Ethics
The IFAC (International Federation of Accountants) and ACCA (Association of Chartered Certified Accountants) have developed codes of ethics for their members to follow. The “Codes of Ethics for Professional Accountants” published by the IFAC lays down various ethical standards to be applied by accountants, internationally.

In some parts of the world, if there are existing codes to be practised by accountants, the more stringent codes must be used instead. The following are the elements of the IFAC’s code of ethics:

Integrity

Objectivity

Professional competence and due care

Confidentiality

Professional behaviour

Although the IFAC sets the codes of ethics, it has no direct ability to punish the violator, but expects that the member bodies take some action to punish the violator.

The “Code of Ethics and Conduct” issued by the ACCA and is within their annual rulebook. ACCA’s code of ethics is based on the IFAC’s codes and thus their fundamental elements are identical to that of IFAC’s.

ACCA Disciplinary Committee

An ACCA member (student, affiliates and members alike) may be called to appear before the Disciplinary Committee for breach of any ethical principles. The common consequences are warnings, fines, suspension or exclusion of the membership.