Analysing internal position:overall position Flashcards
Examples of non financial data to assess strengths and weaknesses:
-Operations
- HRM
- Marketing
Operations data (non-financial):
- Area of management concerned with planning and controlling the production process.
- Productivity of labour/capital used in production. (allows stakeholders to measure the efficiency with the businesses inputs and outputs).
- Measures of quality (e.g customer satisfaction through surveys, scrap rate)
- Capacity utilisation. ( 2 reasons : Businesses like cinema’s no additional costs to attract customers but generates extra revenue, can be an important measure. 2) Price competitive industries high capacity utilisation may give a competitive advantage through price)
HRM: Financial measures
- Labour costs per unit
- Labour productivity - measures quantity produced per employee
- Unit labour costs - takes into account wage costs and productivity.
HRM: Non-financial measures.
- Absenteeism: High indicates workforce lacks engagement and motivation.
- Labour turnover- assessing a business’s HR performance.
High: increased recruitment costs
Low: less costs more motivated staff, job security
Marketing:
- Consumer behaviour
- Market share
- Brand recognition/loyalty
- Marketing budgets
- Key forces driving change in a market.
Environmental data:
Management of energy, natural resources or waste will affect the current performance of a business.
Importance of Core competences:
- They arise from combined expertise, knowledge and experience from the founders of a business.
- Gives a business a firm source of a competitive advantage.
- Competitors cannot copy easily
Examples: Loyal customer base, Brand rep, quality and innovation.
Advantages of core competences:
- Enhance performance, provide competitive advantage.
- Can help a business add value to their products
- May increase market power
- Can form a basis for creating new businesses.
Core competences - Criticisms.
- If a business outsources a number of it’s operations. Workforce becomes more fragmented, result in lack of purpose and workforce performance drops.
- Due to dynamic and rapid changing markets and customer needs, having CC’s are unlikely to help managers meet evolving demands.
Assessing short and long term performance:
- R and D (Long-term) investing for the future.
- Profit quality: measures the extent to which a particular type of profit is sustainable.
- Customer satisfaction: High shows a business who are trying to build up customer loyalty and a brand
- Employee engagement: High employee engagement seek a long term relationship with employees. Employees most valuable asset
Brand image + Rep: Long-term take decisions to enhance its brand.
Value of other measures of assessing business performance: Kaplan and Norton’s Balance scorecard
- Based on the approach that financial data is inadequate on its own as a business’s performance. Non-financial data should be included aswell.
-Can use the model to make decisions which align with the businesses mission.
- Management tool enables a firm to clarify its vision and strategy and translate them into action.
4 Quadrants of the balance scorecard:
- Financial performance (e.g ROCE, cash flow)
- Customer value performance (lead times, satisfaction and loyalty)
- Internal business process performance ( Productivity and quality)
- Learning and growth ( employee engagement, Innovation of new products and employee engagement)
Value of the balance scorecard:
- Helps a business identify objectives, to fulfill it’s mission
- Creates short and long term methods of measurement for the objectives in performance areas.
- Ensure decision making focuses on objectives already set
