AOS 4 - The need for change Flashcards
Business change
Is the alteration of behaviors, policies & practices of a business
key performance indicators
are criteria that measure how efficient & effective a business is at achieving different objectives
percentage of market share
measures a business’s proportion of total sales in a specific industry expressed as a percentage
net profit figures
calculated by deducting total expenses incurred from total revenues earned over a period of time
number of sales
the number of goods & services sold by a business within a specific time period
number of customer complaints
the number of customers who have notified the business of their dissatisfaction
rates of staff absenteeism
the average number of days employees aren’t present when scheduled to be at work for a specific period of time
level of staff turnover
the percentage of employees that leave a business in a year & have to be replaced
number of workplace accidents
measures the number of injuries & unsafe incidents that occur at a work location over a period of time
level of wastage
the number of inputs & outputs that are discarded during the production process
rate of productivity growth
the increase in outputs produced from a given level of inputs over time
force field analysis theory
is a model that determines if businesses should proceed with a proposed change. This model identifies & examines factors that promote or hinder the change from being successful
driving forces
are forces outside the business’s environment that promote change
restraining forces
are factors within or outside the business’s environment which resist change
STEP 1 - identify the need for change
Businesses face internal or external pressures to change what must be altered to fulfill business objectives and reduce these pressures
STEP 2 - identify driving forces
which internal & external factors promote the proposed change
STEP 3 - identify restraining forces
which factors resist the proposed change
STEP 4 - assign scores
determine the strength of each driving & restraining force by assigning numerical scores that are based on their level of influence on the proposed change
STEP 5 - analyze & apply
add up scores of driving forces & compare it to total of restraining forces.
force field analysis - A & D
A
- business can examine if the proposed change will be successful
- Businesses can potentially save time by promoting the main driving forces & limiting the main restraining forces
- Businesses can potentially save money by only implementing change where success is likely
D
- emps may be unhappy if driving forces exceed restraining forces & change still occurs
- can be time-consuming especially if a business must go ahead with a change.
internal driving forces
are the forces that the business has control over & are relevant to the internal environment
external driving forces
are factors that exist outside of the business that must be responded to in order to remain competitive
managers as a driving force
- vested interest because business performance impacts their financial & job security
- managers will act as an internal driving force as they’re incentivized to push for change that’ll help the business to achieve its objectives
- the achievement of objectives will reflect a positive performance improving a mangers job security to financial benefits
employees as a driving force
- in return for their contribution employees have expectations of competitive wages, supportive working conditions
- as such, any proposed change that can improve the working conditions of employees will see them become a driving force
pursuit of profit as a driving force
- opportunities to improve financial performance will often encourage a business to change
- additionally, that’ll make a business better able to fulfill its obligations such as providing a return to shareholders
reduction costs as a driving force
- strategies that reduce wastage or improve productivity can reduce a business’s costs & improve its profitability as often this’ll lead to an increase in a business’s net profit margin
- a business may be able to source materials from a cheaper supplier to move their locations to benefit from cheaper rent as a means of reducing costs & improving profits
competitors as a driving force
- if a business fails to compete within its respective market, it’ll struggle to survive
- competitors changing prices using new tech or running advertising campaigns can affect the performance of other businesses in the market
- this makes competitors a driving force for change as a business must always try to remain competitive
tech as a driving force
- if a business fails to adopt suitable tech may impact its ability to compete & survive
- as tech is constantly progressing always acts as a driving force for change
societal attitudes as driving forces
- society is more aware of how businesses are operating because of the internet as a result companies need to align operations with societal attitudes & changes
- the rise of online shopping forced businesses to develop an online presence
- an increasing trend of individuals becoming health conscious has driven many businesses to create new healthy product ranges
legislation as a driving force
- if current operations breach new legislation businesses will have no choice but to change the way they operate
- Businesses will always need to comply with legislation making it a constant driving force
innovation as a driving force
- with constant competitor pressure businesses are always improving existing products & services or introducing new ones
- many businesses will continuously innovate their products or procedures in order to maintain sales & market share
globalisation as a driving force
- businesses are now operating in a single global market meaning all businesses face the pressure of international competition
- increased international competition means that businesses need to find more efficient ways to operate
- if a business fails to recognise that they’re competing in a global market it’ll likely not survive
restraining forces
are internal & external factors that resist a business change or actively try & stop it
managers as a restraining force
managers may be unwilling to introduce a business change f they don’t support the change or it threatens their position
employees as a restraining force
- employees may resist a business change if the outcome is uncertain it affects their job security or they fail to see a reason for the change
- employees may even actively oppose these changes by carrying out industrial action
- to overcome employees as a restraining force managers often have to persuade or create incentives for the proposed change to be adopted
legislation as a restraining force
- a business must consider the types of legislation that apply to any proposed business change
- to overcome a legislative restraining force a business may have to apply for licenses obtain permits or even change contracts & agreements
time as a restraining force
- such as legislation deadlines or financial pressures
- if time has been identified as a restraining force a business may have to find ways to alter the time restrcition
financial considerations as a restraining force
- a business must ensure that it has enough funds to carry out the proposed change
- if the business cannot finance the change it’ll need to explore different ways of obtaining the required funds
organizational interia
the tendency for a business to maintain established ways of operating
organizational interia as a restraining force
- when a business matures & grows in size processes & procedures often have to be made consistent to promote efficiency in operations
- as staff become familiar & comfortable with these structures attempts to make changes can be difficult
porter’s lower-cost strategy
is 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
charge similar prices to competitors -
experiences higher profit margins than competitors because the business has the lowest cost of operations
charge slightly lower prices than competitors -
maintains a higher profit margin than competitors by keeping the price decrease smaller than the business’s cost advantage
charge much lower prices than competitors
thin profit margins are outweighed by a high volume of customer sales gained from significantly lower prices
a business can achieve the lowest cost of operations by
- reducing internal operating costs
- reducing costs of supplies
porter’s lower-cost strategy - A
A
- attractive to cost-conscious customers
- business operations optimized & must remain efficient & effective to maintain lower costs of operations
- reduce expenses of operations
porters differentiation strategy
offers customers unique services or product features that are perceived value to customers which can then be sold at a higher price than competitors
a business can create a point of differentiation for their product or service by
- implementing innovations
- introducing new tech
- niche marketing
porters differentiation strategy - A
A
- customers are often loyal to brand because unique
- employees may feel increased sense of pride
- quicker sales from loyal customers
- can charge premium process for products or services as a customer cannot purchase elsewhere
porters differentiation strategy - D
D
- can be difficult to prevent competitors from replicating
- new employees may require additional training to adapt
- higher investments of the money such as research to develop innovative products
- higher selling prices can deter some customers
porter’s lower-cost strategy - D
D
- customers aren’t brand loyal, and competitors offer cheaper alternatives
- fewer employees required as work tasks may be merged, employees may feel stressed
- thin profit margins & reliance on low operating costs can leave a business vulnerable to unforeseen increases in expenses
Lower costs vs differentiation
LC
- sells at similar of lower price
- target s costs conscious customers
SAME
- increases business’s profitability by providing competitive advantage
D
- sells at premium prices
- targets customers that aren’s price sensitive
contemporary case study - Costco
porter’s generic strategy
most of the revenue through sail operates with a thin profit margin of around 2%, still, able o generate significant profit.
reducing operating costs
- purchasing stock directly from manufacturers
- $0 advertising budget
- purchasing large amounts of stock
lower prices than competitors significantly lower than industry average
