AOS 4: Reviewing Performance/ The Need for Change

Question 1

Business change & feature

Answer 1

Business change refers to the alteration of behaviours, policies, and practices in a business.

FEATURE: Changes within a business can impact every area or just one part of the business and can have both positive and negative outcomes.

Question 2

A reactive approach to business change

define, expand, pressures, manner

Answer 2

A reactive approach to business change involves a business changing in response to a situation or crisis.

Businesses must respond to change in a way that enables them to remain competitive and viable. This means several pressures are acting on the business
–> change is usually undertaken in a manner that is more urgent and relatively unplanned.

Question 3

A proactive approach to business change - define, what it involves, pressure

Answer 3

A proactive approach to business change involves a business changing to avoid future problems or take advantage of future opportunities.

This may involve a business:
- fulfilling a gap in the market
- recognising a change in market trends which poses a new business opportunity
- investing in new technology to avoid areas of the business becoming outdated.

This enables fewer pressures acting on the business and allows them to implement change in a calmer and more controlled manner.

Question 4

Consequences of poorly managed change
AND
Qualities for good change management

Answer 4

Consequences of poorly managed change:
* stress
* increase in staff turnover and absenteeism
* loss in productivity
–> leading to not achieving business objectives

Qualities for good change management:
* build a shared vision
* provide good support - training and consultation
* strong leadership
–> strong management skills especially in communication

Question 5

Distinguish between proactive and reactive approaches to business change.

Answer 5

“One key difference between proactive and reactive approaches to change is that…”

Proactive change involves a business preparing for the future and getting ahead of its competitors, whereas reactive change involves a business adjusting its practices to keep up with competitors or to respond to a critical situation where change is urgent to maintain business reputation.

Question 6

Sims/diffs of reactive and proactive approaches to change

Answer 6

Sims:
* Both approaches involve the business undertaking change for future benefits, such as growth, progression, and to improve or restore its brand image.
* Both approaches require the support of the manager, who must utilise management and leadership skills if the change is to be implemented successfully.

Diffs:
* Proactive change occurs when a business takes advantage of an opportunity and avoids future problems.
WHEREAS
* Reactive change occurs in response to a situation or crisis that is essentially forcing the business to change.

• Proactive change is more planned, coordinated, and controlled, with fewer pressures acting on the business throughout the change.
  WHEREAS
• Reactive change is more spontaneous, urgent, and pressured.

Question 7

KPIs & feature

Answer 7

Key performance indicators (KPIs) are criteria that measure a business’s efficiency and effectiveness in achieving its different objectives.

KPIs can be used to measure business performance across a range of areas, including financial performance, quality of interactions with customers, and the ability to meet expectations of employees regarding their workplace environment.

Question 8

Percentage of market share & HOW IT CAN BE USED TO EVALUATE PERFORMANCE

Answer 8

Percentage of market share measures the proportion of a business’s total sales, compared to the total sales in the industry, expressed as a percentage figure.

EVALUATE PERFORMANCE:
Percentage of market share can highlight the proportion of customers that a business and its competitors are able to engage with and therefore shows how well a business is performing in its industry.

Question 9

Net profit figures & HOW IT CAN BE USED TO EVALUATE PERFORMANCE

Answer 9

Net profit figures are calculated by subtracting total expenses incurred from total business revenue earned, over a specific period of time

EVALUATE PERFORMACE:
A manager could analyse a business’s net profit figures to assess whether expenses are too high or revenue is too low.

Question 10

Rate of productivity growth & HOW IT CAN BE USED TO EVALUATE PERFORMANCE

Answer 10

Rate of productivity growth is the change in the total outputs produced from a given level of inputs over time, expressed as a percentage figure.

EVALUATE PERFORMANCE:
Indicates that a business has become more efficient over time, as it is able to better utilise its resources in its production process.

Question 11

Number of sales & HOW IT CAN BE USED TO EVALUATE PERFORMANCE

Answer 11

Number of sales is the total quantity of goods and services sold by a business over a specific period of time

EVALUATE PERFORMANCE:
A business’s financial performance can be measured using number of sales as a KPI, as it indicates how well goods and services are received by customers.

Question 12

Number of customer complaints & HOW IT CAN BE USED TO EVALUATE PERFORMANCE

Answer 12

Number of customer complaints is the number of customers who notified the business of their dissatisfaction over a specific period of time.

EVALUATE PERFORMANCE:
The number of customer complaints indicates the level of customer satisfaction and engagement with the goods and services they purchase

Question 13

Rates of staff absenteeism & HOW IT CAN BE USED TO EVALUATE PERFORMANCE

Answer 13

Rates of staff absenteeism are the average number of days employees are not present when scheduled to be at work, for a specific period of time.

EVALUATE PERFORMANCE:
A human resource manager would examine the rates of staff absenteeism as an indicator of staff morale.

Question 14

Level of staff turnover & HOW IT CAN BE USED TO EVALUATE PERFORMANCE

Answer 14

Level of staff turnover is the percentage of employees that leave a business over a specific period of time and must be replaced.

EVALUATE PERFORMANCE:
A human resource manager can analyse the level of staff turnover to examine staff morale, employee satisfaction, and the strength of interpersonal relationships within the business.

Question 15

Number of workplace accidents & HOW IT CAN BE USED TO EVALUATE PERFORMANCE

Answer 15

Number of workplace accidents measures the number of injuries and unsafe incidents that occur at a work location over a specific period of time.

EVALUATE PERFORMANCE:
A high number of workplace accidents reflects an unsafe working environment and is a particular concern for human resource managers, as it is their responsibility to ensure the safety and wellbeing of employees.

Question 16

Level of wastage & HOW IT CAN BE USED TO EVALUATE PERFORMANCE

Answer 16

Level of wastage is the number of inputs and outputs that are discarded during the production process.

EVALUATE PERFORMANCE:
High levels of wastage at any stage of the production process is a concern to a business, particularly an operations manager, as it often increases the raw materials, cost, and time required to produce a good or service, consequently reducing a business’ profits. A low level of wastage can reflect an extremely efficient and cost-effective production process, and a business that values sustainability.

Question 17

Number of website hits & HOW IT CAN BE USED TO EVALUATE PERFORMANCE

Answer 17

Number of website hits is the amount of customer visits that a business’s online platform receives for a specific period of time.

EVALUATE PERFORMANCE:
This can be a useful indicator of a business’s customer engagement and customers’ overall interest in the business and its products. This KPI also provides analytical data that can allow businesses to determine what specific products and areas of the business are receiving the most consumer interest.

Question 18

Force Field Analysis
PROS & CONS

Answer 18

Force Field Analysis is a theoretical model that determines if businesses should proceed with a proposed change. This model identifies and examines factors that may promote or hinder the proposed business change from being successful.

PROS:
The Force Field Analysis takes into account the whole business environment when implementing change, hence a more well- informed change can be made

Conducting the analysis can help determine sources of employee resistance to change and thus address them.

CONS:
Conducting a FFA can be time-consuming, especially if a business is already aware of the need for mandatory change.
For example, a change is required for legislation

Conducting the analysis will require business resources, at a cost to the business.

Question 19

DISTINGUISH: Driving & Restraining forces
& restraining forces & FEATURE

Answer 19

Driving forces are the factors affecting the business environment that promote and support business change, whereas restraining forces are factors that resist a business change or actively try to stop it.

(Pt.2 to restraining:)
If restraining forces exceed driving forces, a business change is unlikely to be successful unless strategies are implemented to overcome these restraining forces.

Difference:
A difference between driving forces and restraining forces is that driving forces promote change and improvement within the business, whereas restraining forces have negative impacts which limits a business’ ability to change, consequently affecting the overall success of the business.

Question 20

Force Field Analysis- Lewin’s theory (FFA)
PROS & CONS

Answer 20

Force Field Analysis is a theoretical model that determines if businesses should proceed with a proposed change.
The principles of Lewin’s Force Field Analysis theory are conducted in a step-by-step process, beginning with weighting the forces, then ranking the forces, implementing a response, and finally, evaluating the response.

PROS:
The Force Field Analysis takes into account the whole business environment when implementing change, hence a more well- informed change can be made

Conducting the analysis can help determine sources of employee resistance to change and thus address them.

CONS:
Can be time-consuming, especially if a business is already aware of the need for mandatory change. For example, a change is required for legislation

Conducting the analysis will require business resources, at a cost to the business.

Question 21

Weighting

Answer 21

Weighting is the process of scoring and attributing a value to the driving and restraining forces.

Question 22

Ranking

Answer 22

Ranking involves arranging the forces in order of value and determining the total score of driving and restraining forces.

Question 23

Implementing a response

Answer 23

Implementing a response involves the action that can be taken to strengthen the driving forces, reduce or eliminate the restraining forces, and/or the actual execution of the change.

Question 24

Evaluating the response

Answer 24

Evaluating the response is the assessment of whether the change has been successfully implemented or if further actions need to be taken.

Question 25

Name the driving forces (11)

Answer 25

owners
managers
employees
pursuit of profit
reduction of costs
competitors
legislation
globalisation
technology
innovation
societal attitudes

Question 26

Name the restraining forces (6)

Answer 26

managers
employees
legislation
organisational inertia
time
financial considerations

Question 27

owners and interests (driving)

Answer 27

Owners are individuals that establish, invest, and have a share in a business, often with the goal of earning a profit from its operations.
They act as a driving force for change as they are intrinsically interested in the ability of their business to meet its objectives and continue to adapt, as this is essential to its survival and success.

Interests:
* have a vested interest in the business’ ability to meet its objectives, and its continuous improvement/adaption to change
* have an interest in the financial performance of the business, given they receive income from its operations.

Question 28

managers (driving) & responsibility

Answer 28

Managers are individuals who oversee and coordinate a business’s employees, and lead its operations to ultimately achieve the business’ objectives.

They are responsible for overseeing the implementation of policies and procedures in daily operations, as well as the long-term goals of the business.

Question 29

employees and interests (driving)

Answer 29

Employees are individuals who are hired by a business to complete work tasks and support the achievement of its objectives.

They may act as a driving force for proposed changes that would improve their work environment.

INTERESTS:
* have a personal interest in the performance of the business  provides them with work and an income
* strive to improve processes within the business where they discover opportunities to increase productivity.

Question 30

pursuit of profit (driving)

Answer 30

Pursuit of profit is the desire to increase a business’ level of revenue compared to expenses, beyond its current point

–> is a powerful driving force for change as profit is one of the main determinants of a business’ success.

Question 31

reduction of costs (driving)

Answer 31

The ability to reduce costs is a driving force as it effectively helps a business to increase its net profit.

The reduction of costs can act as a driving force as businesses may implement change to improve efficiency and effectiveness, and reduce unnecessary costs that may arise in business processes.

Question 32

competitors (driving)

Answer 32

Competitors are other businesses within the same industry that sell similar goods or services to a business

Competitors can act as a driving force by encouraging change as businesses seek to eliminate any competitive advantage that rivals have.

Question 33

legislation (driving)

Answer 33

Legislation is the laws and legal regulations that a business has to follow which can act as a driving force if a business has to change its operations and practices in order to comply with the law.

–> As current laws are constantly being amended and new laws are continuously being introduced, legislation is a constant driving force for change.

Question 34

globalisation (driving)

Answer 34

Globalisation refers to the increased trade between countries due to reduced trade barriers and allows businesses to compete on a global scale, which can drive businesses to change in order to survive.

As globalisation allows for goods to be produced in different parts of the world, this allows businesses to take advantage of economies of scale by finding more efficient and cheaper ways to produce their products.

Question 35

technology (driving)

Answer 35

As technology is constantly progressing, it will always act as a driving force for change.

Using technology, businesses can increase the efficiency and effectiveness of their operations, reduce the expenses associated with employee wages, and improve the business’ overall productivity with the ultimate goal of achieving the its objectives.

Question 36

innovation (driving)

Answer 36

Innovation is the process of altering, and improving or creating, new products or procedures.

Businesses are always looking for ways to improve their current operations and products to gain a competitive edge, and therefore, the process of innovation is always driving businesses to change.

Question 37

societal attitudes (driving)

Answer 37

Societal attitudes are the collective values, beliefs, and views of the general public, and can act as a driving force for change for businesses in order to adapt to these societal attitudes.

As societal attitudes are constantly evolving, they will always act as a driving force for business change.

Question 38

managers (restraining) & overcome

Answer 38

Managers are the leaders and decision-makers of a business, and can therefore act as a restraining force for change, by refusing to introduce or implement changes, that they do not support or that threaten their position.

OVERCOME:
It is difficult to overcome managers as a restraining force as they are essentially in charge of the business, hence negotiating a compromise or alteration to the initial proposal may be necessary.

Question 39

employees (restraining) & overcome

Answer 39

Employees are individuals who are hired by a business to complete work tasks and support the achievement of its objectives.

Employees may resist a business change if the outcome is uncertain, they fear they cannot adapt, it affects their job security or work routine, or they fail to see a reason for the change.

OVERCOME:
To overcome employees as a restraining force, managers usually have to persuade or create incentives for the proposed changes to be adopted, often needing to demonstrate key leadership and management skills.

Question 40

legislation (restraining) & overcome

Answer 40

Legislation is the need to comply with laws and regulations

OVERCOME:
To overcome a legislative restraining force, a business may have to apply for licences, obtain permits, or even change contracts and agreements so they comply with the law.

Question 41

organisational inertia (restraining) & overcome

Answer 41

Organisational inertia is the tendency for a business to maintain its established ways of operating.

OVERCOME:
To overcome organisational inertia, a business may have to change leadership, restructure the business, or create work environments that promote new directions.

Question 42

time (restraining) & overcome

Answer 42

Time is the need to complete business changes within a certain period.

OVERCOME:
If time has been identified as a restraining force, a business may have to progressively implement change in stages.

Question 43

financial considerations (restraining) & overcome

Answer 43

Financial considerations are the costs associated with the business change

OVERCOME: If the business cannot finance the change, it will need to explore different ways of obtaining the required funds. In some cases, it may even have to alter the proposed change to suit its financial position.

Question 44

Porter’s lower cost strategy
PROS & CONS

Answer 44

Porter’s lower cost strategy involves a business offering customers similar or lower-priced products compared to the industry average, while remaining profitable by achieving the lowest cost of operations among competitors.

PROS:
Creates barriers to entry for new competitors as it is often challenging for them to match lower prices, whilst simultaneously reducing costs of operations and still remaining profitable

Business operations are optimised and are enabled to remain efficient to maintain low costs of production.

CONS:
Customers are not loyal to particular brands. If another business were to offer a cheaper alternative, these customers would likely switch to the new business immediately

Low prices may result in customer perceptions that the good or service is of lower quality.

Question 45

Pricing approaches & methods of reducing operating costs and the cost of supplies- for Porter’s lower-cost strategy

Answer 45

Pricing approach:
Charges similar prices to competitors-
Experiences higher profit margins than competitors because the business has the lowest cost of operations.

Charges slightly lower prices than competitors-
Maintains a higher profit margin than competitors by having the selling price decrease by a smaller amount than the business’s cost- saving per unit.

Charge much lower prices than competitors-
Thin profit margins are outweighed by a high volume of customer sales gained from selling products at significantly lower prices.

Methods of reducing operating costs and the cost of supplies:
Reducing operating costs-
* Producing a high volume of output through automated production lines.
* Reducing expenditure on marketing and advertising.

Reducing the cost of supplies-
* Obtaining discounts from suppliers by purchasing supplies in bulk.
* Maintaining low inventory supplies by using Just In Time materials management strategies.

Question 46

Porter’s differentiation strategy

Answer 46

Porter’s differentiation strategy involves offering customers unique services or product features that are of perceived value to customers, which can then be sold at a higher price than competitors.

PROS: Customers are often loyal to the business because the unique product features or services are not offered by competitors

Can charge premium prices for products as customers cannot purchase the product elsewhere

CONS:
Investments of time and money may be required, such as on research to develop innovative products or improve service levels of employees (time).

Can be difficult to prevent competitors from replicating points of differentiation.

Question 47

How to achieve lower-cost and differentiation, & what markets are they suitable for?

Answer 47

Lower-cost:
A business can achieve the lowest cost of operations by reducing operating costs through sourcing cheaper supplies or producing basic no-frills products.
The lower cost strategy is viable in industries where there are a large number of cost-conscious customers who have little brand loyalty and will choose to purchase from the cheapest supplier.

Differentiation:
A business can achieve a differentiation strategy by offering products to specific markets or developing innovative products, distinguishing themselves from other competitors in the industry.
A differentiation strategy is suitable for markets where customers are not price- sensitive and specific customer needs are currently either unmet or under-served. It is also suitable within markets that are highly competitive as a business needs to stand out.

Question 48

Sims/diffs between lower cost and differentiation

Answer 48

Sims (1):
* Increase a business’s profitability by providing a competitive advantage

Diffs (3):

• LC sells at similar or lower prices than competitors whereas differentiation sells at premium prices
• LC targets cost-conscious customers whereas differentiation targets customers that are not price-sensitive

*LC has an Internal focus on operating processes whereas differentiation has an external focus on meeting customer needs