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Prime function of the business business essay

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Harvey Norman Holdings Ltd.

CEO:

Gerry Harvey

Prime function of the Business:

Harvey Norman Holdings Ltd is a public company (franchise). The franchisees sell products in the following categories: Electrical Goods, Furniture, Carpet and Flooring, Bedding & Manchester, Small Appliances, Computers and Communications, Lighting, Home Improvements and Bathroom Hardware.

Harvey Norman Brands

• Harvey Norman – Electrical Goods, Furniture, Carpet and Flooring, Bedding & Manchester, Small Appliances, Computers and Communications, Lighting, Home Improvements and BathroomHardware.• Domayne – Launched in May 1999 and currently has 8 stores in NSW, 1 store in ACT and 2stores in Queensland. Domayne offers a contemporary range of furniture, bedding, computer andelectrical products.• Joyce Mayne

OPERATIONS

Role of operations management

strategic role of operations management – cost leadership, good/service differentiation

Harvey Norman purchases in bulk from manufacturers such as Panasonic for lower costs => price competitive whilst upholding quality products. Most of their products are standardized goods from renowned brands ranging in quality and price. Services include customisable renovation designs and ideas as well as home improvements.

interdependence with other key business functions

Harvey Norman ensures that they continually deliver ” Quality, Value and Service” as well as their huge range of trusted brand recognition. Shown through its marketing channels and values, Harvey Norman must support meet these needs of the consumers through its business operations with minimal faults and high quality inputs while purchasing products for a lower cost. Sales and profits generated through operations are reflected in the financial statements and sheets on their annual budget. To support a healthy financial position, Harvey Norman strives to enforce these aspects (Quality, Value and Service) throughout its human resources.

influences

globalisation, technology, quality expectations, cost-based competition, government policies, legal regulation, environmental sustainability

New technology/ ProductsAust. Consumers are big spenders on the latest products Eg. DVD players are now found in many homes. Social influence new home entertainment phenomenon. Some reasons for this social change could be a result of the following: Higher stress faced in the work placeIncrease in street and petty crimeThe high cost of entertainmentThe increase in working familiesThe result of these social changes is that many people now prefer to stay home for their entertainment. This has lead Harvey Norman to consider new technologies such as 3D interior home renovation software to design furniture, communications and electricals to suit the consumer. The company has continued to be at the forefront of new technological home entertainment appliances, at times arranging exclusive launches. Globalization/Economic sectorsThe retail offering in offshore markets has rapidly expanded over the past few years with 73 company-owned stores located in New Zealand, Ireland, Northern Ireland, Singapore, Malaysia and Slovenia. In October 2011, Harvey Norman entered into the Croatian market. One major influence will be the difficulty in transferring a business concept which is successful in the domestic market and making it work in another, different market. Unlike Australia, the Singapore retail and electrical goods market is highly competitive. In Harvey Norman 2008/2009 economic downturn: Closed OFIS storesSold off ten stores, nine of which were externally leasedIncreased rent/charges from franchises on Harvey Norman propertyReduced advertising budget and imposed greater financial onus on suppliers to fund advertisingReduced overseas expansion and limited these to New Zealand and IrelandAnother influence involves financial considerations. Retailers find it hard to make money from selling electrical goods and computers in Singapore. This is because of high rental on retail locations and tight profit margins. It is possible and common for a retail business in Singapore to have a high turnover of goods and not make much money. Another influence, and one any businesses face when expanding internationally, relates to interest rates and exchange rates. Online shopping poses a real threat to Harvey Norman. Technology driven entertainment appliances can be purchased an shipped very easily. In fact online hopping in the United States is increasing seven times the rate of traditional retailing. Best Buy is one such internet retail. The Australian market is small enough for global firms to commence operations introducing price wards to obtain market share and thus effecting Harvey Norman’s profit marginsAs yet the domestic market offers only limited future growth for Harvey Nomrna. Even with innovative products being introduced every three years, the growth is limited to 15% annually.

Quality Expectations

Range of different quality products and brands-> quality of designWarranties are set to ensure a lasting product -> Fitness for PurposeStars and well-know international rating systems on many electronics are used to indicate durability. Cost-Based CompetitionHarvey Norman is facing larger competitors on costs such as JB-HI-FI and arch-rival Kogan which offer best price guarantees. Goods are standardized as they buy from suppliers and do no manufacturing themselves, so less waste and more standardization (thus cheaper). Through bulk buy inputs of their suppliers, Harvie Norman has achieve economies of scale to compete with even lower costsHarvey Norman has an implemented a ‘ Best Price Guarantee’ offer. Legal InfluencesEach country has different laws regarding business practices. Harvey Norman must be aware of these different laws, and modify its business practices around these laws. In 2011 Harvey Norman confronted the Fair Imports Alliance. In late December, Harvey Norman launched a gaming website that leveraged its Irish subsidiary to export video games direct to customers and therefore was outside of the jurisdiction of Australian tax laws for the purposes of GST. Concerns were raised earlier in the year about the prospect of retailers conducting business in such a manner. In Junes 2000 the ACCC complained about the price of cameras in their colour brochure. In 2001 the ACCC alleged Harvey Norman used bait advertising when marketing Quicken software. The allegation was that Harvey Norman advertising the product without having sufficient stocks on hand. This bait advertising broke the Trades Practices Act. Social influencesEntertaining at home towards the move towards luxury inner city apartments. This sees Harvey Norman pushing towards the electronic and homing renovations that are increasing becoming more technologically advances – 3D design software. Harvey Norman always keeps up with the up to date with the latest trends such as Iphones. Political influencesSome of the political issues that Harvey Norman took while expanding overseas are protectionism within the local economy, tariffs and war and civil unrest. Because Harvey Norman does not export its goods, but rather source them locally, it does not have to worry so much about local tariffs. Furniture goods which are sold in the Harvey Norman store in Slovenia are sourced locally, eliminating the need to import the goods from elsewhere, hence lowering costs. Harvey Norman has chosen countries with little political instability, in order to minimize the chances of this hampering its business efforts. Corporate social responsibilityRecently the retail giant Harvey Norman has been accused of selling flooring made from native forests in NSW where koalas face extinction following an investigation by environmental activists who tracked timber harvested in prime koala habitat. The environment group Markets for Change investigation found Harvey Norman buys timber flooring from forests recognised as critical habitat for koalas in NSW and sells it as part of its ” Naturally Australian” flooring range. But recently initiates such as the proper handling of waste such as recycling paper, wood, plastics and other materials have been undertook by Harvey Norman, promoting ethicality. This initiative aims to reduce and control hazardous wastes produced by Harvey Norman with set targets and goals underlining the reduction of plastic bags distributed and increased promotion of recycling through 2011-2016

corporate social responsibility

the difference between legal compliance and ethical responsibility

All Harvey Norman personnel must observe the spirit and the letter of the law andexercise high standards of ethical conduct when dealing with: shareholders, creditors and general communitycustomers, consumers and suppliersemployment practicesthe community. One of Harvey Norman’s primary mechanisms for ensuring legal compliance andfostering a positive and ethical business environment is Harvey Norman’s riskmanagement framework. The main objectives of the risk management framework is to identify compliancerisks, maintain appropriate internal controls that address these risks and providemonitoring systems to detect illegal or unethical conduct. In addition, the framework provides detailed policies that, together with otherHarvey Norman policies, provide a more practical translation of the requirements, values and principles expressed in this Code. This Code facilitates Harvey Norman’s compliance with its legal and regulatoryobligations and maintenance

operations processes

inputs

transformed resources (materials, information, customers)

Product supplies, market analysis/info, yearly budget and financial statements, tables and racks, stationary, warranty claims, customer complaints/info.

transforming resources (human resources, facilities)

Employees, distribution centre (logistics), IT, warehousing, computer and design software for home renovation, store facilities.

transformation processes

the influence of volume, variety, variation in demand and visibility (customer contact)

Volume &Variation in demand: Harvey Norman purchase in bulk and store in distribution centers/warehouses (depends on product e. g furniture in warehouses as they are delivered after an order), thus distributing then to where the volume is needed most. Variety: Range of product choices from various suppliers. Visibility: As Harvey Norman obtains products from manufactures, they have lots of customer contact, with warranty claims, marketing campaigns, online website for customers and relations

sequencing and scheduling – Gantt charts, critical path analysis?

Harvey Norman relies heavily on its suppliers to be scheduled on time with goods and thus maintain a good relation. The speed and ability of the supplier to meet these demands will influence upon the sequencing and scheduling techniques of the business.

technology, task design and process layout

Online stuff in HR, internet online shopping: internet strategyStores were reconstructed to enable a wide variety of items to be displayed after home entertainment packages were introduced in a ticket manages in response to social changes. Renovation Process1) Visit showrooms and renovation consultants advise the latest materials and finishes. 2) Renovation consultant will organise for an experienced designer to visit home and create a renovation specifically designed and tailored to suit consumer needs. 3) View your prospective renovation on our 3D Design Software. 4) Once satisfied with renovation design, contracts, plans and specifications will be confirmed. 5) Designers will debrief to one of our technical representatives, who will visit your home to ensure all technical aspects are covered and answer any questions you may have. 6) A project manager will be assigned to renovation and guide through the entire renovation process. 7) Materials are ordered, a schedule of works created and a starting date confirmed with customer. 8) Project manager will make regular contact with you during the renovation process to ensure that customer is informed and satisfied with the works and job progress. 9) Experienced site supervisors will make scheduled site visits and complete process checklists to ensure that work is progressing appropriately. 10) Renovation is completed in a timely fashion and to Harvey Norman’s exacting standards. 11) Allocated site supervisor completes a final inspection and completion report. Lots of job audits and skills are matched to help suit the job description as shown by the many occupations and abilities of the Harvey Norman renovation staff.

monitoring, control and improvement???

Shown by previous renovation process, Harvey Norman undertakes a lot of monitoring of the progress and completion of the product. Through inspections, scheduled data and completion reports, Harvey Norman is able to find the mistake within the process and later implement control methods to help the improvement stage.

outputs

customer service

DeliveryInstallationCashback & RedemptionsBest Price GuaranteeRefund, Return and Repair PolicyRaincheck PolicyManufacturer’s Warranty

warranties

Many of Harvey Norman’s products come with a guarantee or warranty from the manufacturer. In addition, they come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.

operations strategies

performance objectives – quality, speed, dependability, flexibility, customisation, cost

Maintaining good relations with its suppliers allows Harvey Norman to understand their capabilities of quality and speed as well as creating dependability through good communication. With a range of different quality brand suppliers, Harvey Norman is flexible and cost efficient, allowing the business in some cases (such as home renovation) to allow customer customisation of some services.

new product or service design and development

Harvey Norman’s experienced design and renovation team offers professional advice and services to allow the creation of new and specialized home improvements through design software.

supply chain management – logistics, e-commerce, global sourcing and inventory management – advantages and disadvantages of holding stock, LIFO (last-in-first-out), FIFO (first-in-first-out), JIT (just-in-time)

Harvey Norman negotiates a price for plasma televisions from Panasonic, as discounts for larger quantities are considered. In some products such as furniture and some electronics (usually bulk), when a display is sold, a brand new goods is collected from the warehouse/distribution centre to deliver to the customer.

outsourcing – advantages and disadvantages

To facilitate its operation, Harvey Norman outsourced their corporate IT infrastructure to two data centers in Sydney.

technology – leading edge, established

Leading edge- 3D design softwareEstablished- Picolitre fine print-head technology, scanning & bar-coding, computer systems. Home entertainment and introduction of computers back in the 1995. E-Commerce

quality management

control

assurance

improvement

When Harvey Norman purchases products from supplies, they acknowledge the quality management processes that their supplies take: Quality is assured with high manufacturing standards (international standards/ratings)Lanfranco furniture (a brand of Harvey Norman) is created within a quality control framework equal to the world’s best practice. Products are examined at all stages of the operations process to continually up to date predetermined standards.

overcoming resistance to change – financial costs, purchasing new equipment, redundancy payments, retraining, reorganising plant layout, inertia

The introduction of the company franchise system could have crippled the company. The risky feature of this franchise system is that it was offered without up-front fees. Unlike other financial systems there was no early financial grain using this system. If the changed had not worked, then the value of the remaining company would have diminished to almost nothing. Adopting the force field model for change, Gerry Harvey with the strong support of the Board articulates the benefits of change. This decade there have been numerous stories as the company expects to dominate the Chinese, Dubai, the UK and even American companies. They are useful in driving the company forwards. Gerry Harvey is the change agent who has the drive and passion to implement the changes, despite the risks. He is a great leader. Furthermore, making a change model successful is the role of setting goals and identifying the need for organization change. These changes are discussed with his regular meetings with staff.

Global factors – global sourcing, economies of scale, scanning and learning, research and development

Harvey Norman global expansion always adopts a strategy of opening a few stores within the first years of operation. Currently all markets have at least two stores trading. This enables the company to take advantage of cost efficiency in terms of stock storage, its distribution and purchasing contracts. This cost efficiency is known as taking advantage of economies of scaleHarvey Norman’s large global brand allows it to be the price setter and demand the first purchase of goods throughout the world. This would really boost profits as suppliers worldwide compete to distribute the latest through the Harvey Norman global chain. In terms of warehousing, buying and distributing in Singapore is centralized, suppliers deliver to a single warehouse rather than to stores. Small shops and high rents make on site warehousing in Singapore expensive, so centralization works best in this markets

HUMAN RESOURCES

For each of the following syllabus points, find facts to support any point you make on a case study of your choice. You don’t need to cover every element within each dot point but the more the better. Use one or a maximum of two businesses and be specific and concise e. g. Social – Coca-Cola has a large number of female staff comprising over 36% and many of these are part-time. For this reason they have established a subsidized day-care centre next to head office for ease of working mothers and encourage flexible hours to be a more family friendly workplace.

role of human resource management

interdependence with other key business functions

outsourcing

human resource functions

using contractors – domestic, global

key influences

stakeholders – employers, employees, employer associations, unions, government organisations, society

Management/Owners- Management/owners expect the company to experience growth as this will increase the value of their investment. The franchise owner’s are also employers, the company’s performance materially affects the welfare of their employees. They want the company to: be at the forefront of the Australian retail marketcontinue to monitor, predict and adjust to consumer trendscontinue to meet the needs of their target marketscontinue having a positive brandachieve increases in sales revenuemaintain and grow market share in each of their targeted segmentsSo management want employment relations to deliver a workforce that adopt a positive and enthusiastic attitude and who strive to be known as the best retail staff in Australia. Employees- The remaining staffs (including the staff’s people) are employees. They want to work in a friendly environment, receive fair treatment, remuneration that rewards good performance and have career opportunities. The 2009 closure of five OFIS stores caused a loss of 120 jobs for employees. These employees have vested interest in the overall company as so employees from the nine other stores that were closed. The company does have a responsibility for these employees and according to Director John Slack-Smith have been working very hard at relocating these employees to other sections (Harvey, Domayne or Joyce Mayne) of the organisation. Government: Government through its agencies takes an active role in the affairs of a public company like Harvey Norman. Governments want all sectors or stakeholders involved in Harvey Norman (shareholders, employees, consumers) to be protected. Government agencies such as Australian Industrial Relations Commission (AIRC) (Employment Advocate) must examine each Certified Agreement or other type of employment contract. These contracts must no disadvantage employees. The Human Rights and Equal Employment Commission (HREOC) enforce the various aspects of the NSW Anti-Discrimination Act. The number of franchises offered to both genders would be of interest to this Commission. Trade Unions: There is minimal trade union presence at Harvey Norman. Employees are on individual contracts, many AWA’s are still in operation. Disgruntled employees can take matters to court; there is very little evidence of this type of action within the franchise system.

Society:

legal – the current legal framework

the employment contract – common law (rights and obligations of employers and employees), minimum employment standards, minimum wage rates, awards, enterprise agreements, other employment contracts

Franchise owner sign a franchise agreement. It is an individual contract. In the event of any conflict or breaches these contracts can be terminated. When conflicts occur, this termination however does not automatically occur. In the event of trouble the franchise owners is offered training and extra tuition to overcome and perceived or real weaknesses. If the problem continues or it is apparent the owner is not suitable to continue, then the agreement will be terminated. Other employees are employed under the following contracts: Full-time (permanent)Part-timeCasualThese employees are employed by the franchise owners and hence are not classified as Harvey Norman Head office employees. All executive staff is employed under individual contracts and these can be terminated with a month’s notice. Conditions include criminal conduct and gross misconduct or negligence such as sexual harassment. The individual upon termination must return all records and repay and outstanding loans. Contracts of senior executives have no fixed terms and any termination must have three monts notice.

occupational health and safety and workers compensation

antidiscrimination and equal employment opportunity

Harvey Norman employs managers on individual contracts and the effect on these of the new legislation will be minimal. However in regards to other staff there will certainly be a number of implications. The 2005 Act had the following effect: there will no longer any protection for unfair dismissals (less than 100 employees)staff may be able to trade off minimum conditions such as 2 weeks holiday payStaff can have their hours averaged at 28 per week, this means they can work longer hours over Christmas and given time off in the quieter months of MayEmployees can be employed as contractors and will look after their own insurance and superannuationLittle or no union involvement, although at present there is very little involvementThe 2009 Fair Work Act will have minimal effect on Harvey Norman, the only changes will be the reinstatement of unfair dismissal (this must be taken within 14 days) and the bargaining must take place in a condition of good faith (with to without trade unions)The various social justice legislative Acts such as Anti discriminations Acts, Equal Employment Opportunity and Unfair Dismissal have always been followed and all strategies need to be adopted with these in mind. Clearly, the number of franchised stores managed by males indicated the company could look at these issues further. However to combat this Katie Page was promoted to the Board, and this is something not many Australian companies can boast; a female executive on the company board; Franchise owners sign a franchise agreement which is an individual contract and in the event of any conflict or breaches these contracts can be terminated. When conflict occurs however the termination does not automatically occur, franchise owners are offered training and extra tuition to overcome weaknesses. If the problem continues or owner is not suitable to continue then the agreement will be terminated. Employers that work for franchise owners are employed only by the franchise owners and as a result are not classified as Harvey Norman Head Office employees making them exempt from the responsibilities ofExecutive Staff is employed under individual contracts which can be terminated with a month’s notice. Conditions on termination may include criminal conduct, gross misconduct or negligence such as sexual harassment.** With this approach Harvey Norman takes a radical perspective(?) in ER and ensures that the business avoids the legalities and responsibilities to employees through the franchise system and avoids conflict by individual agreements where termination of employment can be a result of conflict.

Economic

The retail industry is a highly competitive and receptive to change like no other industry. Employees always have the ability to move into a competitor’s payroll. In a recession this is not a major concern and given a fairly low skill entry point the company is always able to attract new staff. Economic influences do not overly affect employment practices at Harvey Norman. Although there is little doubt that with a downturn in economic activity there is increasing pressure on staff to meet their target. In terms of recruitment managers are either headhunted or promoted form entry positions. The company does not recruit managers’ form other retail organisations. The company likes to select young and enthusiastic workers and promote these to higher positions. The company likes to harness its employees into their culture and is not keen to accept outsiders. They are very mindful of the concept of cultural incompatibility.

technological

Technology is obviously a major influence of Employment Relations at Harvey Norman. Employees must be flexible to keep learning about new products and this managed by continual training, the majority of which is done online. Training is ongoing and a cyclical process, staff is kept up to-date with the latest developments from either Head Office or suppliers. Online courses and video conferencing.

social – changing work patterns, living standards

– Changing working patterns means retailing has become a seven day a week job with considerably long shifts. Employees need to be willing to work long and varied hours in comparison to regular employee involved in other industries. Harvey Norman employees are expected to work long hours and reach goals each period. The changing work patters mean that retailing is now virtually a seven days and 10 hour day experience. Employees need to be willing ot work long and varied hour in comparison to a regular employee involved in other industries. Harvey Norman employees must be willing to accept a different type of employment. There are no set hours, all employees are expected to work long and hours and reach goals each period

ethics and corporate social responsibility

In the past Harvey Norman was known as having poor governance. In accordance with auditors, Ernst & Young, this area has dramatically improved. The other area of concern especially with shareholders in 2005 was the executive remuneration. In 2005 a remuneration committee was formed consisting of three members who are independent and non-executive directors. It appears a difficult concept to grasp directors who are independent. The responsibilities of the committee include: Executive remunerationIncentive policiesRecruitment, retention and termination policiesThe overall aim was to provide a package that is fair and reasonable taking into factors of competitive packages and the business environment and overall company performance. Executive packages is an ethical concern, particularly when some executive managers earn between $15m and $5m at a time when profit levels are falling and employees are losing their positions. This cannot be said for executives at Harvey Norman

processes of human resource management

Acquisition

Staff selection is a vital ingredient to an effective employment relations strategy. Franchise candidates are selected from either sales staff of employees of companies that supply goods and service to Harvey Norman. Every candidate then has the opportunity to work in a store for a period for three months. They are appraised on aspects of sales targets, ability t accept the organisational culture and their overall quality. Other members of the team will undertake the appraisal. If the candidate measure up they are officially accepted into the team. The selecting team is empowered with this responsibility.

Development

Induction: New employees are given both an unstructured and structured program. New employees learn from others within the department on how to dress, conduct themselves and the philosophy of the company. Structured program techniques such as sales techniques, point of sales, financial records and company structure are covered on line

maintenance

separation

strategies in human resource management

leadership style

Harvey Normanʼs franchise system eliminates middle-management because the owners act as unit leaders. Its aim is to keep management close to customers. With this approach Harvey Norman benefits as it avoids many legalities with its own employees as the business is broken into small franchised areas where employees become business owners and are responsible for their own employees. Every employee is a part of the Harvey Norman team. The team approach is strongly encouraged by senior management. They can see the benefits of involving as many employees as possible into a ‘ team’ structure. Very flat structure. Unitarist to conflicts

job design – general or specific tasks

recruitment – internal or external, general or specific skillsement

The company recruits young people and uses their management team to target and select talented staff for promotion. The majority of staff are recruited at entry point, induction and online training programs introduce these to the reward culture operation within the company.

training and development – current or future skills

performance management – developmental or administrative

rewards – monetary and non-monetary, individual or group, performance pay

Potential candidates are offered up as franchise owners. In addition to this, there are non-monetary reward of having freedom and responsibility of managing an independent small business. Many sales people are able to earn extra income through commission. In addition, Harvey Norman employees are given an opportunity to own their own piece of the company through the franchise system. Executive staff remuneration packages includes the following: Base salaries which are decided by the Remuneration Committee. This committee examines the financial position of the company and salaries in other companiesPerformance Cash incentives. These bonuses are paid at the end of the financial period based on specific performances and if goals have been met. Other monetary benefits such as car allowance, education and medicalSuperannuation contribution. These may be in excess of minimum requirementsShares and options organised by an independent firmIf employees perform well they will be recognised and rewarded accordingly. Extra money in form of commissions is available as a reward. Company places heavy emphasis on reward and promotion.

global – costs, skills, supply

Ethnocentric. The company only selects quality people in global expansion exercises. They attract and hire the best people in the market and especially those who are sensitive to local market conditions. Head Office monitors and conducts reviews on all stores. Extra training: language, customs. Local product preferences, local business practice, language training/tuition

workplace disputes

resolution – negotiation, mediation, grievance procedures, involvement of courts and tribunals

Harvey Norman adopts a Unitarist approach to resolving conflict. There are a number of covert mechanisms that are used to achieve this. Some of these include: the selection processthe reward schemecommissionsfranchise agreementscommunications and trainingappraisalsIn the event of any problems the employee receives a first warning in a meeting with the manager. Following on from this, if any problems continue employees can be given up to three counseling sessions. These counseling sessions are conducted by management and at the completion of each session they are signed off by all parties. At this point any further breaches of the company rules in staff dismissal. Legally dismiss workers within the confines of the unfair dismissal legislation.

effectiveness of human resource management

indicators

corporate culture

benchmarking key variables

changes in staff turnover

absenteeism

accidents

levels of disputation

worker satisfaction

In retailing, the customer determines the success of employment relations practices. This is evident y three measure, presentation, number of staff and number of customers. All these aspects relation to quality of staff. The culture has been a long time developing and it is what distinguishes this company from other retailers

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