AOS4 - Reviewing Performance

Question 1

What is Business Change?

Answer 1

Business Change refers to an adoption of a new idea or behaviour by a business. Some changes are forced upon a business (reactive) whereas others are changes that a business chooses to undergo (proactive)

Question 2

What are types of environmental business pressures?

Answer 2

Internal Changes - Financial Considerations, Managers, Employees
Operating Changes - Competitors, Suppliers, Customers
External Changes - Legislation, Globalisation, Societal Attitudes

Question 3

Proactive Question

Answer 3

Answer

Question 4

What are Key Performance Indicators?

Answer 4

Key Performance Indicators (KPI) are a type of measurement that helps the business understand how efficient and efficient they are performing in a certain area.

Question 5

What is Percentage of Market Share?

Answer 5

A business’s share of the total sales in an industry for a particular good or service, expressed as a percentage

Question 6

What is Net Profit?

Answer 6

The amount of money left over after expenses have been deducted from revenue earned

Question 7

What is Rate of Productivity Growth?

Answer 7

the amount of outputs produced compared to the amount of inputs and the rate in which it increases over time

Question 8

What is Number of Sales?

Answer 8

amount of goods or services sold in a specified period of time

Question 9

What is Rate of Staff Absenteeism?

Answer 9

the number of employees that do not turn up to work when expected to be there

Question 10

What is Level of Staff Turnover?

Answer 10

the rate in which employees leave the business and need to be replaced

Question 11

What is Level of Wastage?

Answer 11

amount of resources and finished goods that are discarded during the production process

Question 12

What is Number of Customer Complaints?

Answer 12

the amount of people that are dissatisfied with the business and/or its products and have notified the business of their dissatisfaction

Question 13

What is Number of Workplace Accidents?

Answer 13

amount of people injured or nearly injured at work due to unplanned events

Question 14

Explain why benchmarking is important when measuring business performance?

Answer 14

Benchmarking refers to being able to compare the business’ results against some form of standard. This is important when measuring performance as it allows the business to determine how much exactly they have improved or declined from previous years or against opposition performance.

Question 15

What is a Force-Field Analysis and why is it done?

Answer 15

A Force-Field Analysis is the process of identifying and analysing the forces that will drive and those that will resist a proposed change. Through an ‘action plan’, the change manager will list the driving and restraining forces, rank them as to their strength and importance and determine which ones must be changed to allow the change to occur successfully. A Force-Field Analysis is done to allow the change to occur to overcome the restraining forces and push the business beyond the present status quo and towards the desired state

Question 16

What are the benefits of a Force Field Analysis?

Answer 16

• Determines if the change is worth pursuing
• Allows managers to develop ways to reduce restraining forces
• Timelines can be developed for change

Question 17

What is a Driving Force?

Answer 17

A Driving Force are those forces that initiate or support change and push the business towards a new desired state.

Question 18

How can Driving Forces enforce change in a business?

Answer 18

CRIMPLES TG
• Managers: make decisions about the future of the business
• Employees: innovative thinking and demand for businesses to change conditions
• Competitors: response to competitors by gaining a sustainable competitive advantage
• Legislation: change of law (e.g. penalty rates)
• Pursuit of Profit: ways in which the business can increase profits
• Reduction of Costs: rising costs can initiate change
• Globalisation: the pursuit of global markets can increase global competition
• Technology: new technology can increase competitiveness (communication, manufacturing)
• Innovation: new ways of production and new ideas
• Societal Attitudes: failing to keep up with societal attitudes risk falling behind

Question 19

What is a Restraining Force?

Answer 19

A Restraining Force are those forces that work against a proposed change and make it difficult for the business to implement change successfully.

Question 20

How can Restraining Forces enforce change in a business?

Answer 20

F MOTEL
• Managers: clash of opinions and an inability to lead a business through change
• Employees: inability to be consulted or appreciated can lead to feelings of fear and anxiety
• Time: lack of time due to competition and financial position
• Organisational Inertia: lack of ability to respond to pressures and embrace change
• Legislation: may block or make it difficult to implement change
• Financial Considerations: immediate and long-term costs of change can cause difficulty

Question 21

What is Porter’s Generic Strategies?

Answer 21

Porter’s Generic Strategies are ways of gaining a competitive advantage or edge over other businesses in the same industry or market segment.

Question 22

What are the Five Competitive Forces that make up an industry?

Answer 22

1. Supplier Power: how easy is it for suppliers to drive costs up
2. Buyer Power: how powerful buyers are in driving prices down
3. Competitive Rivalry: looks at the number and capability of competitors
4. Threat of Substitution: how easy it is for customers to find similar goods or services
5. Threat of New Entry: how easy it is for new competitors to enter the market

Question 23

What is the Lower Cost Strategy and how can it be achieved?

Answer 23

Lower Cost Strategy refers to where a business is able to gain a competitive advantage by becoming a low-cost producer in its industry. This can be achieved by:
• Achieving Economies of Scale: producing on a large scale to save money per unit
• Implementing Technology: saves cost of labour
• Preferential Access to Raw Materials: access to materials the business has priority usage

Question 24

How can businesses gain a competitive edge whilst implementing the Lower Cost Strategy?

Answer 24

Porter states that a business can gain a competitive advantage if it is able to become a cost leader (produce at the lowest cost) and charge a price that is near the industry average, without causing a significant impact to the quality to the customer. Businesses can find cost savings in the value chain (set of activities a business performs to add value to a good or service)

Question 25

What is the Differentiation Approach and how can it be achieved?

Answer 25

Differentiation Strategy refers to where a business aims to be unique in its industry in ways which appeal and attract customers, thus allowing the business to charge premium price. This can be achieved by:
• High Quality/Unique Materials: allow for a better-quality product
• Patents: something unique that no other business can reproduce
• Marketing: unique marketing which attract variety of customers
• Relationship: unique relationship with sponsors and endorsers
• Innovations: differentiate their product from the others in the market
• Training: proficient training which allows the employees to create the difference
• Distribution: exciting and easy ways of delivery to consumer

Question 26

What are the advantages and disadvantages of the Lower Cost Strategy?

Answer 26

A: Products attract price sensitive customers, save money in production which increases profit
D: Low Customer Loyalty, Low cost associates with low quality

Question 27

What are the advantages and disadvantages of the Differentiation Strategy?

Answer 27

A: Endorses Brand Loyalty, Charge a Premium Price
D: Unique Features can be copied, resulting in a decrease in competitive advantage, Deters price sensitive customers

Question 28

Compare the features of Porter’s Generic Strategies

Answer 28

Sims - allow a business maintain a competitive advantage thus allows a business to position its self for the future
Both hard to implement into small businesses
Diffs- one implements a strategy to save money in production whereas another does not
One promotes positive business consumer loyalty whereas lower cost does not