E-commerce and its effects in Ireland
3 Business Environment
E-commerce is a business issue. It will affect all businesses in Ireland, and in particular those engaged in international trade. It will also affect businesses previously sheltered from international competition in home markets. It can make a significant contribution to the achievement of national social and economic objectives. It also offers significant new enterprise and inward investment opportunities. A supportive and adaptive business environment is essential to realise this potential.
The changes being brought about by e-commerce at enterprise level require new frameworks for conducting business: government policies relating to commerce need to be re-examined, as most were formed with a very different image of commerce in mind. Reform is needed in legal and regulatory areas, such as trusted third parties, contract law and tax collection. However, action is also required in other policy areas that influence enterprise competitiveness including logistics, skills, awareness, training, and international marketing.
This section sets out the key actions required on the part of government, the development agencies, and the enterprise sector. A partnership approach is required to speedily implement the required changes.
3.1. Legal and Regulatory Framework
The development of a secure and conducive legal environment for e-commerce could establish a first mover advantage for Ireland as an e-commerce business jurisdiction. The legal framework for traditional forms of commerce has developed over the centuries, but e-commerce is giving rise to fundamentally new forms of commerce, for which the legal framework remains to be determined. A number of the key aspects of the legal framework are being discussed at EU level, but Ireland must also introduce domestic measures to provide a clear, certain and secure environment for e-commerce transactions.
3.1.1 Certification and Trusted Third Parties
Trust is essential to all commercial undertakings. In e-commerce, trust is particularly important as the parties to the transaction may never meet - the identity of partners is therefore a serious issue. The buyer wants assurance that the seller (a) exists, and (b) is worth doing business with. The seller likewise wants to know that the buyers are who they say they are, and that the payment is secure.
A system whereby organisations are accredited to certify the existence of individuals and companies in Ireland is required. Such organisations should interact with their counterparts around the world so that the same identification information, on potential suppliers and customers, can be made available to Irish companies and individuals trading internationally. It is proposed that accreditation should be on a voluntary basis.
The provision of assurances that individuals and companies are worth doing business with should be left to the market. Financial and other organisations may decide to provide such information.
An Post, through its subsidiary PostGem, and the Chambers of Commerce of Ireland have both launched certification services for enterprises in the first half of 1999, which are welcomed.
A draft consultation paper1 has been prepared on a proposed future approach. It is expected to form the basis for a Bill, to be published in the final quarter of 1999. The consultation paper proposes mechanisms to ensure legal recognition of secure electronic transactions and will also include outline legislative provisions on electronic contracts, electronic signatures, electronic writing as well as certification service providers and related matters. It advocates providing:
* Legislative recognition of electronic signatures
* A legal basis for accrediting certification service providers
* Recognition of advanced electronic signatures, with defined characteristics
* Recognition for "certificates" linking signature verification data to a person and confirming the identity of that person, and "qualified certificates", which meet the requirements of the accreditation authority and are provided by a certification service provide (Trusted Third Party).
The Accreditation Scheme2 envisaged is already at an advanced stage of development in other European countries. However, the accreditation criteria against which certification service providers might be assessed are still being developed. A first mover advantage could accrue to Ireland by providing such an accreditation service in advance of international developments. The characteristics of the scheme to be applied in Ireland are becoming clear:
* Provision of certification services will not be subject to prior authorisation by a Minister
* Accreditation of these certification services will be voluntary in nature
* "Evidential weight" will be given to both electronic signatures and advanced electronic signatures, but by implication, chain of evidence requirements will be more rigorous for signatures associated with non-accredited certification service providers
The following actions are required:
Government Action
* Bring forward, as a matter of urgency, the Bill to provide a framework for voluntary certification. (Department of Public Enterprise and Department of Enterprise, Trade and Employment
Agency Actions
* Develop and administer a national voluntary scheme for accrediting organisations to certify that individuals and organisations in Ireland exist. The accreditation scheme should be put in place quickly and prior to the enactment of legislation. (National Accreditation Board)
Enterprise Actions
* Encourage trade and other organisations to establish self-regulating standards of approval for use by companies engaging in e-commerce.
3.1.2 Copyright
Copyright protection is fundamental to e-commerce and digital distribution of content. A Copyright Bill is being brought forward by the Department of Enterprise, Trade and Employment to be passed into legislation by the end of 1999. It accommodates all outstanding EU and World Trade Organisation (WTO) Directives, and is intended to provide international protection for copyright material in Ireland. Ideally, the legislation should enable the promotion of Ireland as the most secure place from which to do digital business.
A number of actions are required including:
Government Action
Ensure that the new copyright legislation:
* Makes it an offence to post copyright material on public web sites without the copyright owner's consent, even if not downloadable
* Includes protection for technical designs posted on the Internet
* Enhances the enforcement powers and penalties for electronic breach of copyright
(Department of Enterprise, Trade and Employment)
3.1.3 Electronic Contracts
A Directive on certain legal aspects of electronic contracts is under discussion at EU level, but it could be 2001 before an agreed directive is implemented. Ireland should move in the interim to provide a framework of legal certainty. Ireland should set out a legislative framework for e-commerce contracts, specifically addressing the point of creation and conclusion of contracts.
Businesses must ensure that in making offers for the sale of goods or supply of services on their websites, they notify to customers the "contract agenda" of relevant jurisdiction and applicable laws.
The following actions are required:
Government Action
* Enact legislation to ensure the legitimacy and enforceability of e-commerce contracts. The legislation should also ensure certainty on the applicable jurisdiction. Pending agreement at EU level this legislation should be based on a contractual model which has been development the United Nations.
* Ensure contracts made and signed electronically have the same force in law as if they had been made and signed physically.
* Establish a resource on the Internet to provide information for businesses on electronic contracts. (Departments of Enterprise, Trade and Employment and Public Enterprise)
Enterprise Action
* Specify on websites and in e-commerce transactions the legal jurisdiction that will apply to contracts with clients and, where possible, the key legal provisions or a link to a resource setting out the relevant provisions.
3.1.4 Electronic Evidence and Dispute Resolution
There are two key issues relating to the use of electronic evidence. The first is its admissibility, and the second is the weight assigned to it and the parameters for its use. Legislation is required to provide for electronic evidence in civil proceedings and to set out the parameters for its use. This can be done through an amendment to the Criminal Evidence Act, 1992.
Once these issues have been addressed, guidelines will be required as to what procedures are necessary (in respect of storage of data etc.) in order that computer records are considered sufficient in evidential terms.
There is an opportunity for Ireland to develop as an international centre for the arbitration of disputes on electronic transactions. Countries such as the Netherlands and the UK have previously developed as leading international centres for the settlement of copyright disputes. Training of arbitrators should cover the domestic, European and international legal framework pertaining to e-commerce, and in particular, the proposed legislative changes. A pool of arbitrators, who are internationally recognised experts, is essential to the promotion of Ireland as a centre for dispute resolution.
There is also an opportunity to develop as a leading international location for the settlement of small claims. In the medium-to-long term, an electronic fast track/ small claims court could be developed.
The following actions are required:
Government Action
* Update the Criminal Evidence Act, 1992 to provide for electronic evidence in civil proceedings.
* Promote arbitration as a suitable dispute resolution mechanism for e-commerce transactions.
* Encourage national courts to develop e-commerce expertise.
* Consider the establishment of an online international arbitration mechanism, which companies can use to resolve disputes, regardless of their country of origin.
* Publish guidelines as to the procedures necessary (in respect of storage of data etc.) in order that computer records are considered sufficient in evidential terms.
* Consider the establishment of an online Small Claims Court to deal with disputed e-commerce transactions.
(Department of Justice and Law Reform, Department of Enterprise, Trade and Employment and the Department of Public Enterprise)
Agency/Enterprise Action
* Encourage Encourage the development of a pool of arbitrators to deal with disputes on e-commerce transactions. (Law Society/Bar Council/Enterprise Ireland/IDA Ireland)
3.1.5 Liability in Respect of the Sale of Goods and Services
The number and characteristics of intermediaries involved in e-commerce transactions differ from those in traditional commerce, in particular for digitally delivered services. The liability of intermediaries must be clarified, specifically, the application of the 'mere conduit' rule.
Legislation dealing with the sale of goods and services needs to be amended to cater for goods and services offered, sold or distributed electronically. The liability of intermediaries requires to be clarified. The new legislation should apportion liability for loss or damage between the provider of the goods or services, distributors and those intermediaries that act as 'mere conduits'. Intermediaries that simply facilitate or provide access between one party and another should not incur liability for the sale of a product or service.
Uncertainty on this issue can deter the establishment of intermediaries in Ireland and they are an important element in developing an e-commerce economy. The product liability regime for unsafe products also requires examination.
Enterprises engaging in e-commerce should agree with intermediaries the terms of business in advance including delivery, quality, reliability, standards expected, and liability in event of loss or damage. Existing enterprise insurance cover in respect of physical delivery should also be assessed where new modes of delivery are being used.
The following actions are required:
Government Action
* Update the body of legislation relating to the sale of goods and services to recognise goods and services offered, sold, or distributed electronically. The legislation should apportion liability for loss or damage between the provider of the goods or services, and any intermediaries or distributors.
* Clarify that intermediaries operating as 'mere conduits' or simply as access providers should not incur liability.
Joint Government/Agency Action
* Develop Develop a guide for businesses on relevant consumer protection legislation in key US, European and other markets. (Department of Enterprise, Trade and Employment, Enterprise Ireland and Shannon Development)
Enterprise Actions
* Agree in advance with intermediaries the terms of business for delivery (electronic and physical), quality, expected reliability standards, and liability in event of loss or damage.
* Review existing enterprise insurance cover where new modes of delivery, such as courier parcel delivery, are being used to fulfil e-commerce purchases.
3.1.6 Defamation
In theory, defamation cases on foot of defamatory material posted on the Internet can be taken in any country in which it can be viewed. From Ireland's perspective, the liability of companies hosting such material on mirror sites or acting as mere conduits for such material, requires clarification. This is particularly important in attracting the major information and news services to locate here. The regulations should set out the parameters for determining negligence in respect of such material.
3.1.7 Unsolicited Commercial E-mail
Spamming is the practice of sending unsolicited commercial material, such as mass mail shots, to communities or individuals across the Internet. This abuse of Internet capabilities is causing problems for Internet Service Providers (ISPs) and others and disrupts the provision of efficient services to business. National codes of practice need to be developed, differentiating between direct marketing activities and spamming to encourage customer relationship marketing activities from Ireland and to encourage global ISPs to locate here.
Government Action
* Encourage Encourage the development of codes of practice in respect of unsolicited commercial communications via e-mail. (Department of Enterprise, Trade and Employment)
3.1.8 Encryption
One obstacle facing companies involved in e-commerce is controls on the export of encryption products. Encryption essentially scrambles information in a way that can only be undone by users with proper authorisation. The level of security afforded by encryption is related to the size of the authorisation key. This is measured in bits.
Ireland along with most industrialised countries is subject to the Wassenaar Arrangement treaty and relevant EU legislation that regulates the export of products with encryption software built in. The US government exempts the export of products that contain weak encryption of up to a maximum of 56 bits but controls the export of higher-bit products. The affect for e-commerce is that whereas US companies may be permitted to use standard commercial systems with 128-bit encryption within the US, those outside using the same software for e-commerce may be restricted to using products at weaker levels.
Ireland needs to ensure that any regulations of encryption do not create unnecessary barriers to growth of e-commerce and should seek to achieve a relaxation of export controls on encrypted products. One method of achieving this would be to permit the export of products that met set criteria under an open licence after a one-time review.
The following actions are required:
Government Action
* Discuss with the US authorities the options for easing restrictions on trade of high-bit encryption software
* Introduce fast track procedures for licensing encryption products for export or the introduction of an Open General Export Licence. (Department of Enterprise, Trade and Employment)
3.1.9 Hacking
Unlawful interference with the business resources of Irish e-commerce users (hacking) can be a serious problem for companies, particularly where confidential information is involved. Hacking should be deterred by penalties, with a strong enforcement regime.
The following actions are required:
Government Action
* Ensure appropriate regulatory provisions and penalties are in place to deter 'hacking' of e-commerce resources. (Department of Enterprise, Trade and Employment)
* Ensure that skilled resources are made available for investigation of hacking and enforcement. (Department of Justice and Law Reform)
3.1.10 Consumer Protection
There is a need for a clear legal framework relating to consumer protection, both to encourage the take-up of e-commerce among consumers and to provide certainty for enterprises. Enterprises engaging in e-commerce with European and North American consumers should understand in advance their obligations under country-specific consumer protection regulations.
Irish consumer protection law includes EU directives and domestic legislation, and provides substantial certainty and protection for consumers. However, consumer protection regulations are not yet fully harmonised in the EU. A Distance Selling Directive, applicable to e-commerce contracts, is being developed at EU level. This Directive will give consumers the right to prior information on the identity of suppliers, on the characteristics of goods and services being offered, on price and delivery costs, the duration of offers, and the right to withdraw within seven days, (possibly 30 days for financial services contracts and mortgages).
From an enterprise perspective, developing business-to-consumer e-commerce within the existing and proposed framework of consumer protection legislation will require careful management by business firms. Businesses will need to be aware of the consumer protection requirements in markets in which they are trading over the Internet. Specifically, unlike business-to-business contracts, there are limitations to businesses imposing choice of law and jurisdiction clauses on consumers. Under Common Law the jurisdiction where the consumer habitually resides generally prevails. This could have implications for the remote digital delivery of goods and services, such as software and music as referred to in section 2.11 above.
Enterprise Actions
* Clarify the rights and protection afforded to consumers in different countries when engaging in business-to-consumer e-commerce.
3.2 Skills
The emergence of skills shortages is a major issue that could constrain the development of the Irish economy. It is receiving a high priority in other work carried out by Forfás and is not, therefore, dealt with in great detail in this report. Success in tackling skills and the telecommunications infrastructure will, more than any other issues, determine the rate of progress in e-commerce.
The Expert Group on Future Skills published its recommendations in respect of the needs of the IT sector in late 1998. In April 1999, the Government committed h95million to the full implementation of the Expert Group's report. This includes an additional 5,400 places over the next four years in technical, vocational and degree level courses. These places will go a long way towards addressing the high skill needs of the information technology sector into the future.
However, all sectors of the economy will increasingly require multidisciplinary staff and graduates with information and communication technology (ICT) skills combined with other business-related skills if they are to compete in the e-commerce business environment.
Multi-Disciplinary Skills
E-commerce requires ICT expertise, coupled with strong business applications. There will also be a requirement for specialists in e-commerce operations, production management, logistics, graphic design, and multimedia disciplines.
The Expert Group on Future Skills should build on its work for the IT sectors and examine the e-commerce skills needs of the other major sectors of the economy.
A high proportion of the future skills needs could be addressed through the introduction of ICT modules in existing courses, in particular in business, legal and international marketing disciplines. The third level sector will need to integrate ICT/ e-commerce modules into all courses, to ensure graduates are capable of working in an e-commerce environment.
Multimedia/IT
There is a need for a significant expansion ...
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The Expert Group on Future Skills should build on its work for the IT sectors and examine the e-commerce skills needs of the other major sectors of the economy.
A high proportion of the future skills needs could be addressed through the introduction of ICT modules in existing courses, in particular in business, legal and international marketing disciplines. The third level sector will need to integrate ICT/ e-commerce modules into all courses, to ensure graduates are capable of working in an e-commerce environment.
Multimedia/IT
There is a need for a significant expansion of the national third-level multimedia infrastructure, in particular of the facilities in the Dublin Institute of Technology, Trinity College Dublin, the Senior College Ballyfermot and FÁS. An important part of the third-level infrastructure will be the establishment of a dedicated national college for multimedia. Multimedia education should allow students to work closely with companies, both through research project and through work placement assignments.
Consideration requires to be given to the introduction of conversion courses to allow students from other sectors to pursue a career in multimedia. Strong links between multimedia and other educational institutions should be encouraged.
In summary, the creative and technical skill base needs to be developed in the following ways:
* The expansion of existing multimedia activities, particularly in the Dublin Institute of Technology, Trinity College Dublin, Senior College Ballyfermot and FÁS
* The introduction of conversion courses to allow students from other disciplines to pursue a career in digital business
* The development of courses that include modules where students would learn the business benefits of advanced applications
* The establishment of a higher-level dedicated National College of Multimedia
Distance Learning
The NUI, NCEA and other professional bodies need to establish systems for the accreditation of courses delivered online to students. The distance learning university Oscoil and other education and training institutes need to enhance their distance learning provision.
Migration
The inward migration of skills is now a key part of the development plans of a range of companies. While high proportions of inward migrants are returning emigrants and EU nationals, the import of skills for the technology sectors from non-EU countries is increasing. There were an estimated 44,000 inward migrants in 1998, 23,200 of which were returning Irish emigrants, 14,100 were EU nationals and 6,700 were non-EU that would need work permits. To support the development of high-technology companies, relevant government departments need to ensure that applications for work permits are dealt with in an expedient manner and that increasing resources are allocated to processing these applications as the numbers increase over the coming years.
The following actions are required:
Government Action
* Examine the multi-disciplinary and e-commerce skills needs of major sectors. (Expert Group on Future Skills) Encourage the introduction of ICT/e-commerce modules in all third level courses. (NCEA, NUI and CHUI)
* Promote the establishment of a National College of Multimedia (Departments of the Taoiseach and Education and Science)
* Develop the creative and technical skills base through expanding existing multimedia activities and through the introduction of conversion courses
Enterprise Actions
* Examine the operational and marketing skill sets required to compete in an e-commerce environment and prepare in-company skills development programmes.
* Encourage networks of enterprises to develop and undertake e-commerce training programmes at local level.
3.3 Research and Technological Innovation
There needs to be a deeper commitment to research and technological/innovation (RTI) by industry in Ireland, including much deeper and wider collaboration with institutions of higher education. The innovative and commercial sharing and use of technological research among the research community and industry have fuelled the leadership of the US in e-commerce. It has also been based on the continuous flow of new developments and applications in telecommunications and information technology arising from research programmes.
A greater awareness by industry in Ireland of the potential impact of telecommunications and IT research is required. This should include an understanding of the benefits of deeper collaboration between third-level colleges and industry. The Irish Council for Science, Technology and Innovation (ICSTI), under the auspices of Forfás, has proposed, as part of a "Technology Foresight" exercise, the development of the research base in information and communications technologies to world class standards. It is vitally important that progress is made to implement core foresight actions by the end of 1999.
The National Development Plan, 2000-2006 should give priority to a new Research, Technology and Innovation Sub-Programme with a focus on advanced communication research and supporting e-commerce applications.
One of the core recommendations arising from Foresight is the need to develop a Centre for Advanced Informatics. It is envisaged that this would play the leading role in encouraging research teams to address technological opportunities seen to be vital to the national interest. It would provide the natural link to global excellence in key ICT areas, attracting top level professionals from other locations worldwide. It will act both as a resource and an exemplar to all Ireland-based enterprises.
The criteria for approval of R&D support require to be assessed to ensure that they are accessible for research on e-commerce developments and applications. Criteria that concentrate on supporting capital expenditure as part of the proposal rather than on action and qualitative research on the strategic, economic, social and organisational impacts of e-commerce are barriers to development and must be changed. The Department of Enterprise, Trade and Employment and the agencies need to develop a national mechanism that would support companies and third level institutes in the commercialisation of research. Web techniques can contribute substantially to this effort.
The origins of the Internet and its early development lie in research networks. The future of the Internet will also be closely related to the work carried out in third level institutions and advanced research laboratories. Ireland needs to monitor and be involved in the development of Internet II and Next Generation Internet (NGI), and examine the options for participation.
The UCAID project (University Cooperation for Advanced Internet Development) should be used as the stimulus for Irish researchers to contribute to both international and enterprise-based Internet research projects.
The level of research on the development and implications of e-commerce for Ireland and the enterprise sector in particular requires to be rapidly increased. To ensure a strategic orientation this research needs to be jointly funded by industry, the third-level sector and government. This research is essential to the policy/strategy making process at both national and enterprise level. Specifically, research is required in the following broad areas:
* Facilitators and barriers to e-commerce diffusion within Ireland
* Strategic and operational implications of e-commerce for Irish industry
* Management of e-commerce within SMEs
* Economic and social implications of e-commerce for Ireland
The EU Fifth Framework programme has actions targeted specifically at e-commerce related actions. Irish enterprise must be actively encouraged to avail of the opportunity to participate in partnerships where it will contribute to their strategic goals.
The following actions are required:
Government Action
* Implement the recommendations of Technology Foresight in order to make Ireland a centre of world-class research in information and communications technologies.
* Ensure that the National Development Plan includes an Information Society sub-programme (within the RTI provisions) with a focus on e-commerce applications and content.
* Ensure Ireland is appropriately involved internationally in initiatives to develop Internet. (Department of Enterprise, Trade and Employment)
Agency Actions
* Ensure that the criteria used to evaluate e-commerce projects for funding are appropriate to the nature and risk inherent in them. (Enterprise Ireland and Shannon Development).
* Re-emphasize, among client companies, the e-commerce related research opportunities in the EU Fifth Framework Programme that offers part funding on a competitive basis to successful consortia. (Enterprise Ireland/Shannon Development)
Enterprise Actions
* Use the results of research and development studies to help develop new, innovative e-commerce related products and services.
* Use web technologies to improve relationships among research groups and industry.
3.4 Tax
The taxation regime has a major impact on all forms of commerce. How it is adapted to e-commerce, and how well it facilitates rather than hinders such commerce, will be to central to development. The general principle that the tax system should not distort trade between electronic and traditional means should prevail.
3.4.1 Value Added Tax
Under current rules, the supply of digital services such as software and music, to business and private customers within the EU is subject to Value Added Tax (VAT). However, services from non-EU suppliers to EU consumers are not directly subject to VAT in the EU, due to collection and monitoring issues. As the main e-commerce trade is west to east, this VAT 'loss' is a legitimate concern for the EU. As trade shifts from business to end-user, the transaction is more difficult to track, and hence the VAT harder to account for.
At present, companies must register in each member state if supplying goods or services in that State. The EU is, however, considering amendments and aims to have a single place of VAT registration for all electronic traders. Under these proposals the VAT rate applicable in the country of registration would be applied to all business-to-consumer transactions. As Ireland's VAT rate of 21% is higher than some other EU countries, companies will have an incentive to register in and digitally distribute products from the countries with the lower VAT rates, such as Germany with a 16% VAT rate or the UK with a 17.5% VAT rate. Companies will also consider differences in other costs, such as corporation tax.
It would be more in keeping with the basic principles of VAT to have the VAT on digitally supplied services to consumers levied at the rate applicable in the country of residence of the consumer and remitted back to that member state. Ireland should push for the adoption of this solution by the EU.
A number of actions are required:
Government Action
* Seek EU approval for services to be taxed at the VAT rate in the country in which they are consumed. (Department of Enterprise, Trade and Employment, Finance and Revenue Commisioners)
Agency Actions
* Examine the issues and options relating to the development of a VAT regime in Ireland that will best facilitate the growth of e-commerce, including the option of reducing the standard rate. (Forfás)
3.4.2 Withholding Tax
The European Patent Office is proposing that European rules on software patenting be altered to conform to agreements negotiated through the WTO. This could lead to a dramatic increase in the patenting of software in Europe. In these circumstances, software developed in Ireland could benefit from the patent royalty exemptions, and Ireland could become the European centre for patenting software for non-EU companies supplying software in the EU.
Up to now, the software industry has not opted to take out patents on software, given the short product life cycles, and the ability to register and protect copyright on intellectual property. However, this may be about to change, as companies in the US are increasingly patenting e-commerce-related software and processes. The EU is likely to follow this lead.
Through Ireland's series of negotiated tax treaties, the remittance of royalties on patents from Ireland are subject to zero or reduced withholding tax. Reduced rates of 10 per cent apply to treaty countries such as Australia, Japan, New Zealand and Israel, all of which have strong ICT sectors. The rate of withholding tax for non-treaty countries is 24 per cent and the implications of this for attracting investment from non-treaty countries requires to be kept under review as the new patenting regime emerges.
3.4.3 Business Development Capital
While the availability in Ireland of seed and venture capital for high technology start-ups has significantly increased over the past three to four years, there is an increasing need among e-commerce start-ups and entrepreneurs for early stage capital of between £50,000-£100,000. The expansion of existing funds to support technology start-ups related to e-commerce and increased competition between the funds in the technology area should be encouraged by Enterprise Ireland. The following action is recommended:
Agency Actions
* Encourage the expansion of seed and venture funds to support e-commerce related start-ups. (Enterprise Ireland)
3.4.4 Benefit in Kind
The Benefit-in-Kind tax regime must be kept under review to ensure that teleworking is facilitated and encouraged, as it evolves. This should include exemptions from BIK for personal computer equipment and peripherals, and for advanced communications infrastructures, such as ISDN telephone lines.
3.4.5 Profit Sharing and Share Options
Emerging skill shortages and increasing competition on wage levels in parts of the information and communications technology labour market are making it difficult for new and emerging companies to retain high-skilled staff. Encouraging profit sharing and employee share option schemes through the tax system could significantly increase the incentives for entrepreneurship, improve the survival rates of new IT start-ups through retention of staff, and restrain high-skill wage inflation.
The following action is required:
Government Action
* Consider the options and bring forward proposals to encourage alternative forms of remuneration to encourage enterprise in the ICT sector, including the possibility of a reduced income tax rate for income from profit sharing schemes. (Department of Enterprise, Trade and Employment, Department of Finance, Forfás and Enterprise Ireland)
3.5 Performance Indicators
Accurate and timely statistics will be vital for effective policy development in the digital age. The speed of change is such that web technologies themselves must be used for information interchange and dissemination.
There is also a need to continuously benchmark against international best practice the development of electronic commerce in key enterprise sectors of the Irish economy. This work is already underway within the development agencies through Forfás telecommunications benchmarking.
The Department of Enterprise, Trade and Employment, Forfás and Enterprise Ireland have also been involved in a number of benchmarking initiatives at EU level. These included a pilot benchmarking project for the EU Industry Council during 1998 on Information and Communications Technology and Organisation for which Forfás provided the research on Ireland. The industry benchmarking work ongoing in Enterprise Ireland requires to specifically address the development of e-commerce at a sectoral level.
Other countries are moving ahead on addressing this need. The five Nordic countries have developed an initiative to measure ICT usage across 18 indicators. The US is to create a new industry code recognising electronic shopping establishments and trade that will be in place by 2002.
For Ireland, there is a need for data across a range of indicators including:
* The number and classification of e-commerce companies/operations in the country
* Turnover and volumes of online transactions
* International e-commerce trade
* Investment in ICTs in the economy
* Employment and occupation trends in e-commerce industries
* E-commerce sub supply, consumer purchases and so on
The following actions are required:
Government Action
* Assess Ireland's e-commerce statistical requirements and undertake a review of relevant indicators. (Department of Enterprise, Trade and Employment, the CSO, Revenue Commissioners, Forfás and Enterprise Ireland)
Agency Actions
* Include e-commerce indicators in agency surveys where appropriate. (Forfás, Enterprise Ireland, Shannon Development, IDA Ireland)
* Develop the Forfás annual Irish Economy Expenditures Survey to track e-commerce trade in the manufacturing and internationally traded service sectors. (Forfás)
* Co-ordinate and develop sectoral benchmarking to incorporate appropriate measures on e-commerce (Forfás, Enterprise Ireland, Shannon Development)
3.6 Competition Policy
Competition policy will have to address new types of anti-competitive behaviour. Many e-commerce products benefit from non-rivalry (one person's consumption does not limit or reduce the value of the product to other consumers), network externalities (each additional user of a product increases its value to other users), and increasing returns to scale (unit costs decrease as sales increase).
These factors create an environment where producers may seek to engage in practices that permit them to establish themselves as the, or part of the, de facto standard. Similarly leading companies in related sectors are developing their e-commerce capabilities through acquisitions in converging markets. Such developments can hinder innovation and competition.
As the Competition Authority's enforcement of competition law is typically reactive the issue of introducing proactive regulatory guidelines to prevent this development becomes an issue of concern. The EU has issued the following principles regarding an e-commerce regulatory framework:
* No regulation for regulations sake
* Any regulation must be based on all Single Market freedoms
* Any regulation must take account of business realities
* Any regulation must meet general interest objectives effectively and efficiently
Thus legislation in this complex industry will have to be designed not only to prevent anti-competitive behaviour, but also to take into account the need for globally harmonised policies.
The Competition Authority will need to continue to develop its understanding and expertise in technology markets, monitor changes in ICT industry structures as they emerge, and take appropriate action to ensure that innovation and competitive markets are encouraged as e-commerce develops.
3.7 North South
There is a long tradition of successful industrial development in Northern Ireland, with many key technology-intensive firms located there. As a later- developing region, the South has perhaps made more recent progress in the ICT field. In recent years, the cross-border flow of graduates with ICT and software skills and spill-overs of research and knowledge have been mutually beneficial to the development of knowledge sectors both North and South.
A recent survey3 identified a number of difficulties in developing North-South trade. For Northern firms these included currency issues, political/cultural factors and networking. For Southern companies the main difficulties included payments, the need for sales representatives and local councils. The Internet could make a major contribution to eliminating these difficulties, with associated economic and social benefits to all involved.
E-commerce and information sharing could be encouraged as a means of increasing networking through the development of extranets linking the key development and marketing agencies, industry groups and community development actions in the North and South. These should provide links to encourage subsupply opportunities and should also act as forums for market intelligence, case studies and demonstration projects. Public procurement projects could also be featured on these extranets.
Several smaller co-operation efforts with the universities/institutes/RTD base in North are now underway. These include for example the Nortel research centre, the Belfast software R&D infrastructure and the Northern Ireland Nerve Centre. The Technology Foresight report noted the benefits that a Radian style initiative could have for the building of teams around US based opportunities.
The Internet also requires to be used to increase the infrastructural linkages between North and South and ensure optimal use of the installed infrastructure. Airports, ports and logistics centres in the northern half of the island have major contributions to make to cross-border trade and should be facilitated by using Internet technologies to promote the services provided and enable enterprises plan their route and access strategies in a more efficient way.
Co-operation in leisure, tourism and cultural fields already underway should be reflected by portal-style web presence for both marketing and development agencies.
The following action is recommended:
Summary of Key Business Environment Actions
Government Action
* Bring forward, as a matter of urgency, the Bill to provide a framework for voluntary certification. (Department of Public Enterprise and Department of Enterprise, Trade and Employment)
* Ensure that the new copyright legislation:
* Makes it an offence to post copyright material on public web sites without the copyright owner's consent, even if not downloadable.
* Includes protection for technical designs posted on the Internet.
* Enhances the enforcement powers and penalties for electronic breach of copyright. (Department of Enterprise, Trade and Employment)
* Enact legislation to ensure the legitimacy and enforceability of e-commerce contracts. The legislation should also ensure certainty on the applicable jurisdiction. Pending agreement at EU level this legislation should be based on a contractual model which has been developed by the United Nations.
* Ensure contracts made and signed electronically have the same force in law as if they had been made and signed physically.
* Establish a resource on the Internet to provide information for businesses on electronic contracts.
* Update the Criminal Evidence Act, 1992 to provide for electronic evidence in civil proceedings.
* Promote arbitration as a suitable dispute resolution mechanism for e-commerce transactions.
* Encourage national courts to develop e-commerce expertise.
* Consider the establishment of an online international arbitration mechanism, which companies can use to resolve disputes, regardless of their country of origin.
* Publish guidelines as to the procedures necessary (in respect of storage of data etc.) in order that computer records are considered sufficient in evidential terms.
* Consider the establishment of an online Small Claims Court to deal with disputed e-commerce transactions.
* Update the body of legislation relating to the sale of goods and services to recognise goods and services offered, sold, or distributed electronically. The legislation should apportion liability for loss or damage between the provider of the goods or services, and any intermediaries or distributors. (Department of Justice and Law Reform, Departments of Enterprise, Trade and Employment and the Department of Public Enterprise)
* Clarify that intermediaries operating as 'mere conduits' or simply as access providers should not incur liability. (Department of Enterprise, Trade and Employment)
* Encourage the development of codes of practice in respect of unsolicited commercial communications (spam) via e-mail. (Department of Enterprise, Trade and Employment)
* Discuss with the US authorities the options for easing restrictions on trade in high-bit encryption products. (Department of Enterprise, Trade and Employment)
* Introduce fast track procedures for licensing encryption products for export or the introduction of an open general export licence. (Department of Enterprise, Trade and Employment)
* Ensure appropriate regulatory provisions and penalties are in place to deter 'hacking' of e-commerce resources. (Department of Enterprise, Trade and Employment)
* Ensure that skilled resources are made available for investigation of hacking and e-enforcement. (Department of Justice and Law Reform)
* Examine the multi-disciplinary and e-commerce skills needs of major sectors. (Expert Group on Future Skills)
* Encourage the introduction of IT modules in all third level courses. (NCEA, NUI and CHUI)
* Promote the establishment of a National College of Multimedia. (Departments of the Taoiseach and Education and Science)
* Develop the creative and technical skills base through expanding existing multimedia activities and through the introduction of conversion courses. (Department of Education and Science)
* Implement the recommendations of Technology Foresight in order to make Ireland a centre of world-class research in information and communications technologies.
* Ensure that the National Development Plan includes an Information Society sub-programme (within the RTI provisions) with a focus on e-commerce applications and content. (Department of Enterprise, Trade and Employment)
* Ensure Ireland is appropriately involved internationally in initiatives to develop the Internet. (Department of Enterprise, Trade and Employment)
* Seek EU approval for services to be taxed at the VAT rate in the country in which they are consumed. (Departments of Enterprise, Trade and Employment, Finance and Revenue Commissioners)
* Consider the options and bring forward proposals to encourage alternative forms of remuneration to encourage enterprise in the ICT sector, including the possibility of a reduced income tax rate for income from profit sharing schemes. (Department of Enterprise, Trade and Employment, Department of Finance, Forfás and Enterprise Ireland)
* Assess Ireland's e-commerce statistical requirements and undertake a review of relevant indicators. (Department of Enterprise, Trade and Employment, the CSO, Revenue Commissioners, Forfás and Enterprise Ireland)
Agency Actions
* Develop and administer a national voluntary scheme for accrediting organisations to certify that individuals and organisations in Ireland exist. The accreditation scheme should be put in place quickly and prior to the enactment of legislation. (National Accreditation Board)
* Encourage the development of a pool of arbitrators to deal with disputes on e-commerce transactions. (Law Society/Bar Council/Enterprise Ireland/IDA Ireland)
* Develop a guide for businesses on relevant consumer protection legislation in key US, European and other markets. (Department of Enterprise, Trade and Employment, Enterprise Ireland and Shannon Development)
* Encourage networks of enterprises to develop and undertake e-commerce training programmes at local level. (Enterprise Ireland, Shannon development, Údarás)
* Ensure that the criteria used to evaluate e-commerce projects for funding are appropriate to the nature and risk inherent in them. (Enterprise Ireland and Shannon Development)
* Re-emphasise among client companies, the e-commerce related research opportunities in the EU Fifth Framework Programme that offers part funding on a competitive basis to successful consortia. (Enterprise Ireland/Shannon Development)
* Examine the issues and options relating to the development of a VAT regime in Ireland that will best facilitate the growth of e-commerce including the option of reducing the standard rate. (Forfás)
* Encourage the expansion of seed and venture funds to support e-commerce related start-ups. (Enterprise Ireland)
* Include e-commerce indicators in agency surveys where appropriate. (Forfás, Enterprise Ireland, Shannon Development, IDA Ireland).
* Develop the Forfás annual Irish Economy Expenditures Survey to track e-commerce trade in the manufacturing and internationally traded service sectors. (Forfás)
* Co-ordinate and develop sectoral benchmarking to incorporate appropriate measures on e-commerce. (Forfás, Enterprise Ireland, Shannon Development)
* Promote the Belfast-Dublin and Armagh-Monaghan digital corridors as effective channels for trade and information sharing. (Enterprise Ireland and IDA Ireland)
Enterprise Actions
* Encourage trade and other organisations to establish self-regulating standards of approval for use by companies engaging in e-commerce.
* Specify on websites and in e-commerce transactions the legal jurisdiction that will apply to contracts with clients and, where possible, the key legal provisions or a link to a resource setting out the relevant provisions.
* Agree in advance with intermediaries the terms of business for delivery (electronic and physical), quality, expected reliability standards, and liability in event of loss or damage.
* Review existing enterprise insurance cover where new modes of delivery, such as courier parcel delivery, are being used to fulfil e-commerce purchases.
* Clarify and understand the rights and protection afforded to consumers in different countries when engaging in business-to-consumer e-commerce.
* Examine the operational and marketing skill sets required to compete in an
* e-commerce environment and prepare in-company skills development programmes.
* Encourage networks of enterprises to develop and undertake e-commerce traing programmes at local level.
* Use the results of research and development studies to help develop new, innovative e-commerce related products and services.
* Use web technologies to improve relationships among research groups and industry.
Revision Notes
Break-even Analysis
* Total costs = variable costs + fixed costs
* Key formula: break-even = Fixed costs/Unit contribution
* Unit contribution = selling price - variable costs
* Direct costs (variable) are costs directly linked with a product or process e.g. Labour, materials
* Indirect costs = not related directly to one process/product. Example: overheads.
* When drawing the chart do all calculations first - in case the graph is wrong!
* Draw in sales revenue first - so you don't run out of graph paper!
* Make sure you know where profit, loss, margin of safety all are
* Limitations of break-even: refers to ONE product only; assumes you can pit costs into fixed or variable (telephone bill?); ignores economies of scale; assumes that price does not change (discounts?); assumes fixed costs stay fixed; ignored external environment.
Budgetary control
Any system of control sets standards, measures deviations from standards and then takes corrective action. The situation is the monitored.
Budget is a plan expressed in money. Actual performance may be compared with budgeted performance.
Where sales budgets were exceeded by actual sales revenue, the variance is positive/favourable.
Where actual material costs exceeded budgeted material costs, the budget is negative/unfavourable.
Thus this is control through management by exception.
It is important to investigate the reasons behind the variances. If sales revenue was less than budgeted sales revenue this may because the price was too high/too low and/or sales volume was too low. Some variances e.g. Price setting are controllable but, for example, a price cut by a competitor would be uncontrollable - though the manager might have anticipated it.
Budgetary control is supported by cost and profit centres.
Zero budgeting is where the departmental budget is set to zero and any increase must be justified.
Zero budgeting minimises expenditure but in justifying the increase precious time and money may be wasted. (Think: any other advantages/disadvantages?)
In setting budget here should be participation and consultation with other departments to avoid budgets being seen as a 'weapon of control'. Aim for transparency so all concerned know what the target is and how it was decided.
Budgeting And Forecasting
Budget is a plan (in money) relating to a defined time period hence a sales budget refers to planned income over one year.
Purpose of a budget: it's a plan. It's a means of control. In creating the budget there has to be some co-ordination between departments. It also consists of a target by which performance may be measured. It therefore aids targeting - and communication.
Budget may be zero based' i.e. no increase in the budget is acceptable unless fully justified. Thus it is a means of controlling expenditure.
There are different types of budget: sales; cash; production' materials are examples.
Cash flow forecast: a forecast as to future net cash flow. Net is cash inflow minus cash outflow. If net is positive then inflow>outflow.
Method: total money in (sales revenue actually received; loans; share issues) minus total cash out (wages, materials, rent, rates) = net receipt/payment of cash. This added to the opening (beginning) cash and the net result becomes the closing cash...which then becomes the opening cash next month.
Things that can go wrong: debtors (people who owe you money) don't pay - ever; you must make sure in the cash budget you only include money actually paid and actually received; sales may be staggered i.e. 50% now; 25% next month and 25% the month after. The same for purchase. Make sure that you account for that.
Forecasting in general may go wrong owing to external events such as changes in exchange rates (making exports more expensive and imports cheaper) and interest rates (affecting the cost of loans). Equally internal factors may lead to a rise in costs (unexpectedly) e.g. labour efficiency 9too slow) or a rise in wage costs. Scrap/waste may increase also affecting material costs.
If there is a net cashflow and the closing balance is negative (remember it's a forecast) then it might be well advised to organise a loan for that period. Equally a forecast cash surplus could be banked to gain interest. A cash flow forecast is often needed by a bank before it will advance many loans.
The cash flow forecast gives the firm an idea of liquidity.
Business organisation
Aims of a business: profit maximising; sales maximising; satisficing (keeping all parties happy); survival.
Economy is divided into two sectors: private and public.
Private sector includes: sole trader; partnership; private limited company; public company. Public company is NOT owned by the government - that is a public CORPORATION.
Important concept: liability. Companies are limited liability companies, which means that though the liability of the company is unlimited, the risk to the shareholders is limited to the value of the shares they own. A sole trader has unlimited liability (as do many partnerships) and thus may lose everything. (Liability = risk).
Public sector organisations: local government;central government; nationalised industries.
Private sector tends to be profit driven.
Profit is a measure of success and is a motivator for further investment.
Public sector tends to be driven by the need to provide a service - perhaps at the lowest costs.
Public sector business may be privatised (transferred to the private sector). This increases competition and tends to lead to an increase in growth.
Such privatisation may have social effects in terms of unemployment. To cut costs people are made redundant. Often the nationalised industry is over manned in the first place.
Control: quality
Any system of control sets standards, measures deviations from standards and then takes corrective action. The situation is the monitored.
The aim is to prevent (problems); detect (problems if they do occur); correct (these problems before they reach eh customer) and improve (quality as an ongoing process sot maximise customer satisfaction). Then to prevent (mistakes happening again).
Under Kaizen, the operator becomes his own quality inspector. This reduces staff needs and motivates, as the operator will now be responsible for his own level of quality.
Often a trade-off between quality standards and costs. With quality inspections the higher the sample the higher the reliability and thus the quality but the greater the costs in terms of slower production, man-hours and materials investigate and possibly destroyed. The aim is 'right first time'.
Higher quality may also mean slower production levels, better-trained staff and better quality materials. Will the customer notice?
Benchmarking: this is a measurement of the firms performance in terms of quality, output, profits, sales revenue etc against other firms in the same industry with similar products and business objectives.
Quality standards: ISO 9000. Procedurally based. Firms must have a quality manual and quality management systems must be continually evaluated and improved.
TQM = Total Quality Management. Quality begins with design and then the supplier. Suppliers are evaluated (Supplier Quality Assurance) and the emphasis on quality may take precedence over costs in any system of vendor rating (supplier evaluation prior to placing an order). TQM permeates throughout the business from design, suppliers tot eh work of all staff (including administration).
Quality circles are also used where representatives from departments meet regularly to discuss quality. If there is problem the correct department is there e.g. if the quality problem is owing to old machinery then Finance can investigate costs while working with production. Perhaps new training (Personnel) will be needed? How does this quality defect affect sales (marketing) and ho desperate are the remedies needed?
'Quality' is not just about the product but also about the process and the parties involved in the process e.g. Staff, machinery (maintenance) and organisation.
Control - stock
Any system of control sets standards, measures deviations from standards and then takes corrective action. The situation is the monitored.
Stock control means making sure there is not too much stock, too little and it is of the right quality.
JIT means low stock. Thus stock costs are minimised. These include rent, security, obsolescence and capital tied up. Stock is a current asset. High stock reduces liquidity.
Key formula: Economic Order Quantity. This determines the most economic size of each order. Formula: EOQ = Square root of (2od/h) O =ordering costs of the item; d = annual demand; h = holding costs of 1 unit per annum.
EOQ is likely to change as the larger the order the less the costs of actually making the order (per item).
Key diagram: stock control chart showing: maximum, re-order and minimum levels.
Two bin method: two bins of stock, when one bin is empty then it is time to place an order.
When setting the re-order level lead-time (time from when the order is placed to when the delivery arrives) must be considered.
Lead-time is affected by production time, distance; stock levels at the supplier, method of transport.
Stock control may mean that delivery and production times of the supplier are more important than the cost of supply.
Current external events to watch and how this affects the syllabus
GM food protests: pressure group; external environment and its influence on internal.
Single currency: exchange rate: international trade; employment and interest rates.
Stock market collapse especially in Tech stocks: effects sources of finance; business confidence; consumer purchases
Internet developments: affects products (WAP phone) also marketing - communications.
Internet shopping - effects staffing; investment and security issues about the Internet; types of goods sold. Creates jobs though: web designers; site maintainers.
American election: affects investment owing to differing impact of Gore and Bush on markets. Even when resolved there will be uncertainty as neither are truly representative - and will the true result ever be known?
Human Rights Act - effect (untested) on employer/employee relationship and who can do what?
Interest rates: may be raised by Bank of England if they think inflation will rise. This will affect investment; employment; savings/consumption; house prices. Also know the 'impact on a business' (see earlier).
House prices: effects investment and consumer-purchase. A slowdown in the economy will lead to redundancies and thus a fall in demand...profits and more investment.
Blair re-election: feeling of alienation by electorate? Crime figures? Rise in disenchantment by the young? All of this will affect social harmony and stability.
External: legal, social, political, technological
Legal covers employment (dismissal/redundancy as well as Trade Unions); consumer and business behaviour including company formation and contract law.
Social covers attitudes to work, honesty, type of product, employment procedures, leisure pursuits....
Political includes government policy on nationalisation/privatisation; intervention/non-intervention; single currency (or not); fiscal (taxes/expenditure) versus monetary (control money supply = control inflation)
Governments: Conservatives tend to be non-interventionist, anti-Single Currency and pro Business.
Labour tend to be pro NHS, intervention; reducing poverty and will enact social legislation.
Technological includes development of robotics and the Internet.
The key is the impact these four (and economic) have on a business. Technological (for example) will affect staffing, communications, production process and products themselves.
The policies overlap e.g. Politics overlaps with Economic. If this delivers growth this may be through technological innovation. Legislation may reduce red tape for businesses stimulating growth. Legislation may also be seen as a political act.
Important to keep up to date with European Social, legal, Political and technological events too e.g. the October 2000 Human Rights Act.
When dealing with impact on a business we consider: (impact on) Personnel; Production; Finance and Marketing. We also consider the impact of the firm on the external environment.
External Economic environment
The economy is made up of the primary, secondary and tertiary sectors. Primary = agriculture.
Tertiary is the major employer: 65% males and 88% females in tertiary.
International trade: imports (goods coming in) exports (goods going out. Imports/exports may be visible (fridges, cars) or invisible (services: tourism; insurance)
Governments may erect import controls - tariffs (tax), quotas (numerical restriction), exchange controls (limiting the amount taken out of the country). Overall purpose being to protect jobs and overcome a balance of payments deficit. (Deficit is where outflow > inflow - probably though not necessarily, imports > exports)
European market: Single Market (physical, fiscal and technical barriers removed). Opportunity for firms to expand; threat from competition.
Common standards; open markets; freedom of movement of capital, labour and goods.
Note: current debate over single currency.
Unemployment/inflation: tend not to coexist.
Economic growth: increase in the output of the economy
Policies hinge on injections (government spending, exports and investment) and withdrawals (savings, imports and tax) being manipulated to boost or contract the economy. Boost to overcome unemployment; contract to reduce inflation.
Financial accounting
A company publishes end of year accounts.
Accounts made up of: Balance Sheet and also a Trading and Profit and Loss account.
Balance Sheet has on it: assets (items owned by the firm); liabilities (owed by the firm) and capital (loans, shares and retained profit)
Assets may be current (short term) such as stock, debtors, bank and cash. Long term (fixed) assets are: land, buildings, equipment and INTANGIBLE assets such as copyright, brands and goodwill.
The Trading Account details sales and costs of sales (e.g. purchase of raw materials). Sales minus cost of sales = gross profit.
Profit and loss account consists of Gross Profit minus expenses (such s wages, rent, rates, advertising), which gives net profit.
Accounts (Balance sheet and Trading& Profit& Loss account) may be analysed. This is done by using ratios, which may be grouped as: profitability; liquidity; asset efficiency.
Profitability ratios involve...profit and show profit as a percentage of either sales or investment (capital employed) thus gross profit: sales (x 100); net profit: sales (x 100) and net profit: capital employed.
Liquidity (which refers to how quickly you can turn your assets into cash) ratios include: acid test ratio (current assets - stock: current liabilities) and) debtors/sales) x 365 to give debtor collection period. Thus the higher the debtor collection period the weaker the cash flow.
Assets efficiency ratios show how efficient your assets are (assets includes stock, debtors, bank and cash also fixed assets) thus the ratios include: cost of sales/average stock (called stock turn) - the higher this is the lower the stock level; sales /net assets (shows the sales generated by the net assets i.e., the capital of the business) and gearing = borrowed funds/total capital.
Human Resource Management
Key areas: manpower planning; recruitment; training; performance/employee appraisal; welfare; motivation; collective bargaining.
Key function: right number of employees, of the right quality, in the right place at the right time.
Key ratio: labour turnover: (number of leavers in the year/average number employed in the year) x 100
Must be aware of external influences on workforce planning: social (women returning to work); Political (Single Market in EU - freedom of movement of labour); Economic (may affect wage aspirations); Technology (affects training methods and also skills required for tasks); Legal (affecting discrimination, redundancy plans).
Job description: contains details of the job e.g. job title, employment conditions, outline of the tasks involved.
Person specification: Age, Qualifications and Experience (AQE) required.
Training: on -job (internal) learn by doing. Off-job - learn away from work. (Think: advantages/disadvantages of each).
Sources: internal: apprentices, internal notice board; other branches; internal newsletter.
External: private agency; department of employment; newspaper advertisement; notice on factory gates; word of mouth. (Think: advantages/disadvantages of the different sources).
Performance appraisal looks at: punctuality, attitude, output, training courses attended/needed; promotion prospects.
Legislation (at work)
974: Health and Safety at Work Act: covers working environment, processes, plant and methods of work. Emphasis on safety. Duty of employer to provide a safe working environment.
European Union: Safety Framework Directive: covers responsibilities of employers/employees. Duty of care on both sides.
998: Working Times Regulations: minimum standards - 48-hour working week (some exceptions).
975/1986: Sex Discrimination Act. Covers recruitment; dismissal; redundancy; training; promotion; setting of retirement dates. Employers must not unfairly discriminate.
968/1976: Race Relations Act: race, colour, nationality and ethnic origin. Employer must not unfairly discriminate.
995: Disability Discrimination Act. Disabled people must not be treated unfavourably. Employers must improve working environment to help disabled employees.
970: Equal Pay Act: men/women must have equal pay for doing the same tasks.
Body: Commission for Racial Equality can investigate allegations of discrimination against an employer.
Legislation is incorporated and updated into the Human Rights Act October 2000.
Syllabus overlap: ethical behaviour and social responsibility. Opportunity for positive discrimination
Marketing
Marketing is the management process responsible for identifying, anticipating and satisfying customers' needs and wants profitably. (Institute of Marketing)
Function of marketing: supports the overall objective of the firm (sales maximising? Profit maximising?); emphasis is on looking outwards collecting information about he market that is then used by production (design) and Finance (pricing/profits) and Personnel (recruitment needed?)
Firm may adopt the marketing concept i.e. put the customer first. Therefore the information from marketing is used as a starting point for production, personnel etc.
Marketing identifies different markets: consumer; industrial. (Think: characteristics of both?)
Markets may be segmented according to: age, income, gender, location, lifestyle. (Psychographic; demographic; geographic)
Key diagrams in marketing: product Life Cycle and the Boston Matrix.
Product Life cycle. This charts the life of the product. Development, Introduction, growth, maturity, saturation, decline. Extension strategies to extend the maturity stage may include dropping price, finding a new market, changing the packaging.
The Boston Matrix (Star: high market share/high market growth; cash Cow: low market growth/high market share; Problem children: low market share/high market growth; Dogs: low market share/low market growth). A star is the best product. Dogs should be dropped. Cash cows finance the continued growth of stars. Funds may also be used to finance problem children - the market is growing so why is this product's sales not growing with it?
Analysis: this may be SWOT (strengths, weaknesses, opportunities, threats) or PEST analysis (Political, Economic, Social, Technological).
Marketing is just one of the four main functions in a business. It is vital that it is not seen in isolation and students understand how the four functions - Personnel, marketing, Finance and Production - all work together to achieve the objectives of the business.
Marketing Mix
Marketing mix refers to the range of variables making up marketing. Various books give different 'mixes'. The mix may be 4,5,8 or even 20 elements.
Market research: desk and field. Field is new data and will be specific to the task; desk is old and may not be specific. Market research aims to find out the size, nature and scope of the market. In collecting data sampling will be carried out (random, sequential, stratified). Sources include interviews, test marketing, consumer panels and observation.
Price: this is usually set to cover costs unless it is a loss leader. (This is where price is below cost to entice the shopper into the shop where he/she will buy more products). When setting price the responsiveness of the consumer (price elasticity of demand) will be considered. Other pricing strategies include skimming (high price, new product) and penetration (low price to break into the market).
Branding creates a feeling of security and consistency in the mind of the consumer. Demand may become inelastic (less responsive to price changes) and a successful brand will enable the manufacturer to sell complementary products. Brands have a value and feature under intangible assets (in Fixed Assets) in the Balance Sheet.
Advertising aims to persuade, remind and inform the consumer. If successful, demand will increase sufficiently to cover the costs of the advertising campaign. Advertising has been criticised for being unethical as it encourages materialism and (arguably) exploits women/men/children.
Sale promotion - short-term incentive, typically used to extend the product life cycle. Examples include BOGOF (Buy One Get One Free).
Packaging carries information about eh product. May be linked to promotion through tear-off coupons. Also, via bar codes, aids stock control.
Channel of distribution refers to how the product is sold i.e. via wholesaler, retailer. When selling overseas an agent or a merchant may be used.
New product development. When developing a new product consider costs and target market. Product is likely to go through screening (assessing resources needed and viability of the project) before being test marketed (trialled at a 'typical' section of the population) before being launched.
Marketing mix is the range of variables involved in marketing - not to be confused with product mix which is the range of products and production mix which is the range of variables used in production.
Motivation
Practical: how would you be motivated at work? Money? Leadership style? Working conditions? Responsibility? Promotion?
Taylor: Scientific Management. His work lead to work and method study. According to Taylor, productivity may be improved through pay, better organisation, tooling and training.
Content theories: concentrate on the needs of the employee. The employee is not a machine. Look at individual and group needs.
Mayo: Human Relations School. Hawthorne Studies - lighting experiment. Concluded: workers work better when they have attention paid to them. Thus motivate through involvement.
Maslow: Human relations: hierarchy of needs: Basic; Safety; Social; Ego; Self-actualisation. (Think: relate these to work - how does work satisfy each level?)
Herzberg: Human Relations School; motivate: praise, achievement, recognition, promotion. Demotivate: status, pay, working conditions, supervision, company policy. Difficult point: money demotiivates i.e. without enough pay the employee will not work normally. With more pay he/she will but no harder.
Process theories: look at the thinking behind decisions made by employees.
Vroom: Expectancy Theory: motivate people according to the attractiveness of the outcome and the likelihood of achieving that outcome. You will work hard at your job if you think this will get you promotion - and if you actually want that promotion.
Motivation is affected by the leadership style: autocratic (one-way communication. No delegation) and democratic (participatory, delegates, consults). McGregor's theory X and Y describes these two styles. They Y = democratic. X = autocratic.
Link to external environment: legislation on minimum wage also Budget treatment of share options, executive perks, share ownership schemes...
Organisation and growth
One aim of a business may be growth i.e. an increase in size.
Size may mean profits, sales revenue, actual assets (buildings) and/or an increase in employment.
If a business grows it will still try to keep the stakeholders onside: these are the shareholders, customers, employees, suppliers, retailers, government, creditors and society.
Useful exercise: what does each stakeholder want? Profit? Increase in volume of trade?
Growth may be organic: internal - or external.
Internal growth could be by increasing efficiency; reducing costs; improving output by training.
External growth could be by merger, allowing other firms to make theory product under licence; franchising (e.g. McDonalds); corporate venturing (investing in another small company) and merger.
There are four types of merger: horizontal (pub to pub); vertical (pub to brewery); lateral (pub to wine bar) and diversifying (pub to unrelated business e.g. Mothercare).
When a firm becomes larger its average total costs may start to fall - emphasis AVERAGE not TOTAL. This fall in average total costs is evidence of economies of scale.
Economies of scale: the firm gets big, buys in bulk and therefore makes savings per unit.
Organisation and structure
Fayol (a theorist) said that a manager forecasts (e.g. sales); plans (e.g. sales campaign); organises (e.g. recruitment); commands (e.g. tells people what to make); controls (e.g. stock control) and co-ordinates (e.g. between departments). This may be remembered as FPOCCC.
There are different types of organisational structure: line structure - narrow span of control (definition to learn)
As a firm expands it may have a line and staff structure: e.g. firms have specialist departments.
Organisation chart (vertical, horizontal, circular) shows the organisational structure.
Matrix organisational structure: combines line departments with the setting of projects. The project team may therefore have in it members from different departments. e.g. someone from Marketing, Personnel, Production and Finance.
Advantage of matrix: motivational; teamwork; membership is based on ability as the team from the different departments are elected.
Span of control: important concept. Refers to number of people under your direct control. Influenced by the ability of the manager; the ability of the subordinates; the type of task.
Widen the span: leads to more delegation. Narrow it; more direct control. (Link this idea to motivation).
Tall organisation ahs a long chain of command that may be demotivating (alienation; long time for communication). Chain of command refers to the flow of control.
Delegation - the passing down of tasks with responsibility for those tasks BUT ultimate responsibility rests with the manager.
Production
Different types: job; batch; mass; lean; cell; JIT.
Job production: producing a particular output to meet specific demands of one customer. Thus it is a 'one-off'. Example: painting a car with stripes for Elton John and all other cars are plain Likely to be high priced.
Batch production: producing a group of units. Example: painting 20 cars and only when that is finished, moving on to the next 20.
Mass production: standardised products. High volume. Average costs will be low (economies of scale). Division of labour. Probably automated assembly lines.
Mass production may lead to waste, surplus and a demotivated staff owing to the routine nature of the task. Job production will be more customer oriented but productivity will be lower.
Lean production aims to reduce wastage and improve productivity. Emphasises high quality and by involving employees (see Mayo) improves morale.
Cell production: the whole production line of, say, 1000 units may be divided into 100 cells each producing 10 units, or at least a particular section of the product. This encourages teamwork and staff can see the end product of their work.
Kaizen: continuous improvement. Workers take responsibility for quality. Quality circles are set up where representatives from departments meet regularly to discuss quality problems. This builds teamwork. This motivates workers through teamwork and the delegation of authority.
Just-in-time. Low stock. Supplier delivers 'just in time' with high penalties if he/she is late. Stockholding costs are cut. Easier to change product design. If the supplier is late there may be a stock-out situation and market share/profits may be lost. The same if there is a sudden increase in demand.
Trade-off between flexibility and market orientation versus long production runs, economies of scale and falling average costs. Being able to respond to market changes means mobility of labour, multi skills and adaptability of machinery BUT market share should increase. Long production runs means less flexibility but if the market is not changing, the low cost approach should increase market share.
Sources of finance
Source may be internal or external
Internal: reduce costs. This may be by motivation (reducing labour turnover, absenteeism, lateness) and improving output through training.
Internal: keep (retain) profits instead of giving it out as dividends.
Internal: increase sales (see marketing) and/or sell assets.
External: if a company (especially a public one) issue/sell shares. Advantage: no interest payable BUT may pay a dividend. (Discretionary)
External: borrow- long term loan. This may be a debenture. Must pay interest on loans - this is payable before any dividends. If most of a firm's finance is through loans compared to shares then the firm is said to be highly geared. (See Financial Accounting)
Hire purchase/credit sale though different both allow the buyer to defer to defer/stagger payments.
Lease instead of buy OR sell assets and then lease them back.
External: debt factoring - selling your debtors (people who owe you money) to a third party. Receive a reduced fee but something is better then nothing!
The higher the cost/interest then the more likely the source of finance is short term: overdraft has a high interest and therefore should be seen as a short-term loan
The Business Departments
Clearly this is important as the departments make up 'the business' and often questions ask about the impact of "###" on a business.
The departments are: Production; personnel; Finance; Marketing
Production: produces goods; stock control; quality control.
Personnel: recruits; trains; welfare; dismissal; motivation; deals with Trade Unions.
Finance: sources of finance; produces accounts; financial analysis; capital purchasing (buying machinery); budgeting.
Marketing: definition: management process for identifying and anticipating and satisfying customers' needs and wants profitably.
Marketing therefore involves: pricing; packaging; advertising; promotion; market research; new product development; after sales service; distribution. This group of variables is known as the marketing mix.
The key is knowing how these interact as well as knowing how the external environment (SLEPT) impacts on them.
Production and marketing must liase over price (based on cost); packaging (safety and marketability); advertising/stock levels; design and market research; after sales service and guarantees and product quality.
Finance must liase with all through budgets and pricing/costing. (These are just examples) Thus how the external environment affects a business you must think in terms of how it affects Marketing, Finance, Personnel and Production.
The First Atlantic Bank: Training and development
The First Atlantic Bank is a local Chinese bank in Hong Kong established since 1954. It has been operating under a very conservative policy laid down by its founders after having gone through the difficult time in the Banking Crisis in 1963. This policy has proved effective and the Bank has survived from other two Banking Crises in 1978 and 1989. Mr. Johnny Sung, the President of the First Atlantic Bank, was very concerned with the recent situations.
Recently, there were wars among banks in such service areas as presenting gifts to credit card applicants and lowering interest rates on mortgages. The First Atlantic Bank was no exception. All these sales promotional efforts not only involved a cost burden but also hurt the below average profit level. There were pressures for increased competitiveness sweeping the banking industry in the early 1990s. 'De-regulation' was allowing many types of business to offer service previously considered the exclusive domain of commercial banks. Savings and loan associations, credit unions, investment companies and even larger department stores and estate developers had been competing to provide many types of banking services, including credit accounts and loans.
Mr. Johnny Sung had sent memos to various departments to address the concern and has asked the staff to suggest some measures which could:
improve personnel efficiency and do this by working better, not harder;
implement procedures to reduce operating costs and generate new fee income;
establish internal accountability for results.
Mr. Alex Lung, Chief of the Consumer Credit Section of the First Atlantic Bank, having given some thoughts, had submitted a proposal to Mr. Johnny Sung to set up an internal management development programme in the Bank.
He had got the idea from an article by Mr Ben Dung and Ms Jean Bau of the National Atlantic Bank in Taiwan. Their management development programme for management trainees had won them international recognition and an Excellence Award from the Asian Institute of Training and Development. In fact, the President of National Atlantic Bank had singled out the programme in his annual report to the shareholders:
"A management development programme, begun at mid-year, has prepared the bank for further earnings growth. The programme, based on industrial engineering principles, is designed to improve the productivity of employees, equipment and facilities. By year end, the bank had reduced costs by 6 percent, yet expanded its services and maintained quality and rapid delivery. Future improvements in quality, cost and working conditions are expected from the programme."
Traditionally, most banks in Taiwan (including those in Hong Kong) that had recognized the need to become more productive had responded by hiring outside consultants. Mr. Dung and Ms. Bau reasoned, however, that they could do better without outsiders. Instead, their programme was designed to arm the bank's managers with consulting skills, on the grounds that improvements were more likely to be accepted and sustained if they were initiated by, and credited to, the efforts of department managers rather than to outside consultants. The programme was designed so as to use no consultants or outside trainers.
Mr. Alex Lung had modified the programme and adapted to the Hong Kong's banking environment. He had designed to implement the programme by four sequential steps: workshops, follow-up, management presentation and results tracking.
Due to its unique features, the Board of Directors of the First Atlantic Bank had eventually approved the proposal. After having implemented the management development programme in the First Atlantic Bank for a year, the result is astonishing. The efforts of 12 programme participants had helped streamline departmental procedures and thereby yielded more than HK$ 1,280,000 in cost reductions and new fee incomes. Staff reductions had come through normal placement- nobody had lost his job. Total investment in the programme was HK$ 33,600 or HK$ 2,800 per participant, including facilitator/co-ordinator training. The benefit-cost ratio was estimated at 26 to 1, based on the HK$ 1,280,000 in savings and new fee incomes. This figure represented 8 percent of the National Atlantic Bank's net profit in 1995.
QUESTIONS:
Analyse the case in terms of Management Development Cycle:
the problem(s).
the aim(s).
the training need.
the result(s).
the internal marketing was done.
Evaluate the case in terms of:
Attendance;
Response;
Learning;
Application;
Results.
Suggested solution:
Analyze the case in terms of the suggested Management Development Cycle:
The problem was defined in terms of the need for the bank to respond to new competitive pressures.
The aims were to generate new fee income and reduce costs through better procedures.
The training need was defined as helping managers acquire industrial engineering type consulting skills.
The results were generated by using workshops to produce projects that were supported by a co-ordinator, and leading to a payoff in terms of recognition through presentations to senior management.
The internal marketing included the senior management presentations, the publicity to the stockholders as well as other corporate management and by the personnel officers for a national award.
Evaluate the case in terms of: Attendance, Response, Learning, Application and Results.
Twelve people attended the programme.
There is insufficient information as to whether they liked to or not.
The application of learning was enhanced by simulations; however, the participants were required to apply their learning in projects designed to get results through increased sales or reduced costs.
Hanson Bank: The years with the Managing Director.
Mr. Henry Au joined the Hanson Bank in the 1950s, and by 1989 he had worked his way up to be Managing Director. Because he had vivid memories of the banking crisis in 1965, his loan policy was always ultraconservative, both when he served as chief loan officer and later when he became Managing Director. The Banking Ordinance at the time required:
. a minimum paid-up capital of a licenced bank was HK$100 million while the net worth had to be not less than HK$200 million.
2. a minimum holding of specified liquid assets to be maintained by a bank in any calendar month had to be not less than 25 per cent of the deposit liabilities of the bank during that month.
Mr. Au imposed two requirements on lines of credit. The first was that a minimum of 50 percent of the loan (i.e., compensating balance) had to be on deposit in the borrower's fixed deposit account. The second was that the loans had to be cleared at least once a year. Some businessmen withdrew their deposits because he refused to grant them loans. Still, deposit growth was steady as the population grew and its inhabitants became more prosperous.
Mr. Au's investment policy was also conservative, but he displayed great skill in selecting investments that provided high yields, and his record compared very favourably with the records achieved by the professional staff of larger banks.
Mr. Au worked very hard at his job, coming to the office at 7 a.m. to open all the mail and seldom leaving before 7 p.m. He supervised every department personally, and very few decisions, even routine decisions, were made before he approved them. In some cases, he even overruled decisions made by department heads, and some of the latter complained that their employees had fallen into the habit of going directly to Mr. Au whenever they had a question.
Mr. Au was abrupt in dealing with the customers; so many of them preferred to deal with the General Manager. He also refused to set up new business development department although most of the other banks in the area had done so. His attitude was that if a customer walked through the door, we would glad to serve him, but we would definitely not go outside to try to get him in here. This despite the fact that one competitor had obtained $1 billion in new accounts that year through the efforts of its new business development department.
Still the bank's earnings did increase remarkably during Mr. Au's term of office, but he refused to raise dividends, although he did approve a stock dividend of $1.50, and the bank was able to pay the same dividend on the new shares that it had been paying on the old. Thus, shareholders' return increased by 50 percent.
Mr. Au had an announced policy of promotion from within, but he had no training programmes for the younger executives, and because the number of personnel was kept to a minimum no one had any chance to learn any but his own job. When better jobs became vacant, it was almost always necessary to hire someone from outside.
Mr. Au retired early due to illness in 1996, and the Board of Directors is forced to hire a new managing director from the outside because there is no one on the staff who is familiar with the work of all the departments.
Questions for consideration:
What style of leadership did Mr. Au display in this case.
Give evidence of centralization in this case.
If you were one of the Board of Directors, would you want the board of directors to select a new managing director like Mr. Au? If not, what kind of a managing director you have in mind?
Why was there an policy of promotion from within in this case?
When better jobs became vacant, why was it almost always necessary to hire someone from outside in this case?
Suggested solution:
The style of leadership Mr. Au displayed in this case was the authoritarian style. In this kind of style, the focus of power is with the manager, and all interactions within the group move towards the manager. The leader alone exercises decision making and authority for determining policy, procedures for achieving goals, work tasks and relationships, control of rewards or punishments.
Centralization means minimum delegation of authority and responsibility, with most decisions made at the top level of management. Individual circumstances will determine the degree of centralization that will give the best over-all yield.
The evidence of centralization in this case:
"He supervised every department personally, and very few decisions, even routine decisions, were made before he approved them. In some cases, he even overruled decisions made by department heads."
It is suggested that the kind of a managing director who is a democratic leader and a delegator. It is based on the following grounds:
The democratic style is where the focus is more with the group as a whole and there is greater interaction within the group. The leadership functions are shared with members of the group. The group members have a great say in decision making, determination of policy, implementation of systems and procedures.
A delegator is an individual manager who is willing to transfer part of his legitimate authority to a subordinate but without passing on the ultimate responsibility which has been entrusted to him by his own superior. The reasons for delegation are:
Senior managers can be relieved of trivial responsibilities in order to concentrate on more strategic duties.
Delegation enables decisions to be taken nearer to the point of operating without delays caused by reference upwards.
Delegation gives managers the opportunity to experience decision making and to live with the consequences of it.
Delegation enables organization to meet changing conditions more flexibility at the boundaries of their system.
A failure in effective delegation occurred in this case did not necessarily mean that Mr. Au lacked an understanding of the principles of delegation . But it was probably because of unwillingness to apply them in practice. Much of the reasons for this was the Mr. Au's personal attitudes towards delegation: a desire to retain personal control over work and a fear of losing his own job to a brilliant subordinate.
It is a simple truism that without authority the execution of responsibility is difficult if not impossible to achieve. Many managers in this case complained that they had responsibility but not the authority that went with it. As a minimum, therefore, the new managing director should be a democratic leader and a delegator.
In general, promotion from within is a wise policy. There is nothing more discouraging to those currently on the job than to see a new man brought in to fill a higher position for which they have the experience and training. Nearly all companies have such a policy, or at least state that they do; but some follow it more closely than others. Some even appear to hope that eventually they will be able to grow executives within the system, so to speak: hiring fresh university graduates, training them, and promoting them as they become qualified, until eventually it will not be necessary ever to hire from outside except for the beginning jobs. Thus, in some organizations the ideal has been to have a backup man or men for each job of any importance, someone ready to step into the superior's position if latter should leave or be transferred or promoted. The tool used in keeping track of the backup men is termed as the management inventory.
When better jobs become vacant, it is almost always necessary to hire someone from outside because no one in the company has the required expertise and experience to match the jobs.
The Essay Plan - a suggested model
Economics Study Skills: Essay Writing
The Essay Paper in A level economics forms a significant percentage of the final mark awarded by all examination boards. This paper enables examiners to discriminate between candidates and also enables candidates to display the skills and abilities which they possess.
As the essay paper has evolved it has become more demanding with much more emphasis on posing questions which allow candidates to display the higher order skills. Professor Roy Wilkinson of Sheffield University has identified a pyramid of skills which A level economics examinations try to test.
The pyramid of skills: the bottom two layers are "Lower-order skills", while the top four layers are "Higher-order skills".
As there is now less emphasis on testing the lower order skills this implies that it is not possible for candidates to perform well in the essay paper by rote learning of notes.
COMMAND words in essay titles
Examiners report that many candidates underperform because they fail to interpret the key words of an essay title. Below is a glossary of some of the most frequently used command words with suggestions for interpretation:
"Account for ...."
Explain how a particular event or situation came about i.e. 'Which factors would have led a large retailing company to.......'
"Analyse ...."
Break down an argument or information into component parts and identify ways in which these parts are related. Always recognise the underlying assumptions.
"Analyse the extent to which ...."
Show judgement over the relevant importance of different arguments or events.
"Assess ...."
Make some kind of judgement on the relative importance of a particular aspect of economics or business studies, discussing the influence of other factors or events that influence the topic.
"Compare ...."
Describe two or more situations and show the difference and similarities between them.
"Criticise ...."
Present a view on a particular argument, point of view or theory, based on the evidence available.
"Define ...."
A simple statement is not enough. Use appropriate examples or formulae to illustrate and elaborate on your precise definition of a concept.
"Describe ...."
Usually more than a mere description is expected, instead a critical review of some particular set of circumstances or events is usually expected.
"Discuss ...."
Consider the arguments for and against the issue raised in the question.
"Distinguish ...."
Candidates need to show that they understand the differences between two (probably frequently confused) concepts. Similarities and differences need to be discussed and illustrated in distinguishing between the two concepts.
"Do" or "Does ...."
Make a judgement on whether one set of circumstances is preferable to another.
"Evaluate ...."
Make reasoned judgements about the validity of a particular argument or statement, presenting evidence and reasoned argument of all relevant issues involved.
"Examine ...."
Candidates need to unravel the events that led to a particular set of circumstances or the validity of the reasoning that underlies a particular point of view. Stress the relative importance of the different arguments and their relevance to the basic issue under consideration.
"Explain ...."
Interpret the meaning of a particular concept with an example to illustrate understanding.
"Outline ...."
Only a brief description is required. Usually there are follow up parts to this question.
"To what extent ...."
This implies there is no definite answer to the question posed. Present both sides of the argument and exercise judgement by stressing the strength of some arguments over others.
How to improve your technique : some general principles
* Essays need a structure
o jot down a simple plan
o make sure you know where the essay is going before you start writing i.e. your conclusion
* Essays must be a response to a specific title
o avoid writing everything you know on a given topic, irrelevant material gains no marks
o respond to the command words in the question
* Do not forget the essay title
o refer back to the question regularly - probably at the end of every paragraph
o every paragraph should answer the question set, aim for one theme per paragraph
* Avoid one-sided essays
o usually the only questions that A level examiners will set are ones which can provoke differing viewpoints
o always consider what your argument depends upon i.e. the factors or assumptions inherent in your argument
* Demonstrate your depth of knowledge
o analyse the question with care to show your understanding of the subject content i.e.
o avoid paragraphs of textbook description
o use appropriate graphs which must be accurate
o use topical examples to back up your points
o make references to other writers if appropriate (see Study Skills for information on References and Bibliographies)
* Remember the higher order skills of analysis and evaluation
o break down the material in a way that helps reveal the issues involved
o use relevant business concepts to explore causes and effects
o examine arguments critically
o state which arguments you believe to be the most important and why
* Try to please the examiners!
o use appropriate concepts and terminology
o avoid slang e.g. 'The firm will go bust....'
o be concise and relevant
o leave enough time to write a conclusion.