business unit 4 aos 1

Question 1

Concept of Business Change

Answer 1

Business Change: refers to any planned or unplanned alteration to the processes, policies and practices of a business, typically in response to pressures from the external or internal business environments.

Question 2

Why is business change important?

Answer 2

The ability of a business to remain competitive will be influenced by how well it anticipates and adjusts to change. It is therefore essential that a business is proactive, or anticipates and plans for change, rather than being reactive and responding to the effects.

Question 3

Proactive Change

Answer 3

change that is initiated or planned and occurs before a business is affectedby pressures in their environment.

• More effective for a business in managing change as it allows them to gain a competitive advantage due to not being negatively affected by any changes in their environment

Question 4

Reactive Change

Answer 4

change that is unplanned and occurs after the business has been affected by pressures from its environment. The business is responding to change, rather than initiating change.

• Less effective in managing the business as it is already affected by the change, potentially creating a loss in productivity or sales, due to a failure to recognise the change was imminent.

Question 5

Driving Force:

Answer 5

factors that initiates, supports or pushes for change in a business.

Question 6

driving forces: managers

Answer 6

Managers have a vested interest in the performance of the business and want the business to achieve objectives.

• Profitable
• Increased performance

Question 7

driving forces: Employees

Answer 7

• Employees may initiate change that supports their role or workplace conditions, such as working conditions, pay, or work-life balance.
• Improve safety and efficiency of the workplace - eg. new technology

Question 8

driving forces: Competitors

Answer 8

A business needs to monitor the activities of competitors, or rival businesses in the same industry, and respond quickly or risk losing sales.

Question 9

driving forces: Legislation

Answer 9

Laws and regulations set by governments and courts that businesses must follow.

• If the law changes, then businesses are legally obliged to alter their policies and processes to remain compliant.
• Avoid penalties, including fines or business closure.

Question 10

driving forces: Pursuit of Profit

Answer 10

Profit is calculated by deducting expenses from revenue.

• The desire to increase profits and improve the financial performance of a business may initiate or support business change.
• In order to increase profits, a business must either: reduce expenses or increase revenue.

Question 11

driving forces: Reduction of Costs

Answer 11

Costs - supplies, materials, taxes, wages.
* Reduce expenses

Question 12

driving forces: Globalisation

Answer 12

• Acts as a driving force as it encourages the business to enter new overseas markets in order to take advantage of new customer bases and maintain a competitive advantage in an international market.

Question 13

driving forces: Societal Attitudes and Innovation

Answer 13

Societal Attitudes: views, values and beliefs of the general public. * The changing opinions, values and lifestyles of society drive businesses to change their policies and processes.

Innovation: process of improving an existing product or developing a new product, service or process.
* Innovation can improve competitiveness. May be driven by new technology.

Question 14

Restraining Forces

Answer 14

factors that resist the pressures for change, and act to preventchange from occurring.

Question 15

restraining forces:Managers

Answer 15

• They may not have the skills and experienceto oversee the transformation.
• Concerns about how employees and stakeholders may respond to the change.
• Management positions may be made redundant

Question 16

restraining forces: Employees

Answer 16

• Concerns for job security - eg. changes in technology
• Change in workload
• Requirement to learn new skills
• Impact on existing corporate culture

Question 17

restraining forces: time

Answer 17

• A lack of time may prevent the business from successfully implementing the change.
• Time may act as a restraining force when the pressure on a business to change occurs quickly.
• Proactive response - they need to ensure they are constantly planning and anticipating

deadlines, managers announcements, contractor delays

Question 18

restraining forces: Organisational Inertia

Answer 18

• Refers to a business’s inability to react to internal and external pressures to change, and may be due to atraditional or conservative culture.
• The existing management style and policies if they have been embedded into the culture of the business over many decades.

Question 19

restraining forces: Legislation

Answer 19

• Some laws may exist or be introduced which prevent business change from occurring.
• Competition and Consumer Act 2010 - restricts misleading advertising
• Local councils - introduce parking restrictions which may limit foot traffic and prevent a business from expanding

Question 20

restraining forces: Financial Considerations

Answer 20

• Refer to the cost and revenue issues faced by a business, or the availability of finance when implementing change.
• Financial cost associated with the change may make the change not viable.
• A business could perform a cost-benefit analysis to determine whether costs of the change outweigh the benefit and whether to proceed with the change.

Examples of costs include:
* Purchasing or upgrading equipment, technology or buildings.
* Redundancy payments.
* Training employees.

Question 21

• Force Field Analysis Theory (Lewin)

Answer 21

• It is a model which determines whether a business should proceed with a proposed change.

Step 1: Define the Desired Change
Step 2: Identify the Driving Forces - outline examples (1-2)
Step 3: Identify the Restraining Forces - outline examples (1-2)
Step 4: Weighting- Assign Scores and ranking - management will then analyse the relative strength of the forces for and against the change and assign each of them a numerical score based on their level of influence on the proposed change. then they will rank theses forces in order of importance
Step 5: Apply - If the value of the driving forces exceeds the restraining forces, then the change is likely to proceed and the implementation of change will be successful.
However, if the restraining forces exceed the weighting of the driving forces, a manager should outline strategies to strengthen the driving forces and/or reduce or eliminate restraining forces.

Question 22

• Porter’s Generic Strategies

Answer 22

• Porter developed a theory that in order for a business to manage change in their attempt to maintain a competitive advantage, they should choose to adopt either a lower cost or differentiation strategy.

Question 23

• Lower-Cost Strategy

Answer 23

• A business aims to achieve the lowest cost of operations among competitors, allowing them to pass on these savings to customers through offering lower-priced products compared to the industry average.
• Most effective in industries which contain price-conscious customers who purchase products based on the lowest price.

Question 24

lower cost strategy (advantages)

Answer 24

Strong competitive advantage in markets with price-conscious customers who want to purchase a product for the lowest price.

A business aims to achieve the lowest cost of operations among competitors, allowing them to pass on these savings to customers through offering lower-priced products compared to the industry average.

Question 25

lower cost strategy (disadvantages)

Answer 25

A business aims to achieve the lowest cost of operations among competitors, allowing them to pass on these savings to customers through offering lower-priced products compared to the industry average.

Customers may associate lower price of products with lower quality - this may damage the reputation of the business and cause sales to fall.

Question 26

• Differentiation Strategy

Answer 26

• The differentiation strategy offers customers unique services or product features that are of perceived value to customers which can then be sold at higher prices to competitors.
• Examples:
• High-quality product - more durable
• Creating new features or flavours (eg. Lindt Chocolate)

Question 27

• Differentiation Strategy (advantages)

Answer 27

Due to the unique features, the business can develop a highly loyal customer base. This can allow the business to maintain a competitive advantage as the product is perceived as superior by customers to other products in the industry

Question 28

• Differentiation Strategy (disadvantages)

Answer 28

Deter price-conscious customers, limit their potential customer base.

Can be costly and time-consuming to develop differentiation and invest in higher quality products. Examples: sustainable supplier, manufacturing of the product, time and cost involved dedicated to research and development to create an innovative product.

Question 29

• Differentiation Strategy (similarities)

Answer 29

Both aim to gain a competitive advantagefor that business in a specific target market through an increase in sales and market share. This allows businesses in their industry to outperform their rivals.

Question 30

Differentiation Strategy (differences)

Answer 30

CUSTOMERS - Lower cost strategy targets price-conscious consumers who are satisfied with a standardised product, whereas differentiation aims to target customers who want a unique and innovative product.

Question 30

Key Performance Indicator (KPI):

Answer 30

specific criteria used to measure or evaluate the efficiency and effectiveness of a business’s performance and ability to meet business objectives.

Question 31

kpi: Percentage of Market Share

Answer 31

Measures the proportion of total salesthat a business has in a specific industry, expressed as a percentage over a given period of time.

Question 32

KPI: Net Profit Figures

Answer 32

Show what the business has earned after expenses are deducted from revenue over a period of time, shown in an Income Statement.

Question 33

KPI: Rate of Productivity Growth

Answer 33

Measures’ the business’ efficiency in its use of inputs relative to the amount of outputscreated, by comparing the current productivity rate to the past year’s performance.

Question 34

KPI: Number of Sales

Answer 34

Measures the quantity of products sold by a business over a given period of time.

Question 35

KPI: Rate of Staff Absenteeism

Answer 35

Measures the number of employees who fail to turn up for work when they are scheduled to do so, often expressed as a percentage.

Question 36

KPI: Level of Staff Turnover

Answer 36

The percentage of employee s that leave a business and need to be replaced within a given period.

Question 37

KPI: Level of Wastage

Answer 37

Measures the amount of resources that are discarded by the business during the production process.

Question 38

KPI: Number of Customer Complaints

Answer 38

The recorded number of customers who report dissatisfaction in relation to a defect, fault or issue with a product they have purchased in a given time period.

Question 39

KPI: Number of Workplace Accidents

Answer 39

The recorded number of employee-related injuries that occurs in the business over a given period of time.

Question 40

kpi: Number of website hits

Answer 40

Key Information
- Number of website hits is the amount of visits that the business’ online platform receives for a specific period of time.
Deep dive
- Number of website hits is a sign of customer interest and engagement. When the interest translates into orders, then the sales increase, and potentially profits increase.

Question 41

importance of reviewing business peformance

Answer 41

every business needs to review their peformance to evaluate whether they are achieving their objectives and goals, while also identifying potential areas that require change.