business unit 4 aos 1 definitions + key knowledge Flashcards
change
any alteration in the internal and external environment
what determines a business’s competitive advantage
the ability to manage, embrace, and adapt to change
proactive
refer to initiating change instead of simply reacting to events. change is planned and occurs before a business is affected by environmental pressures.
reactive
refers to waiting for a change to occur and then responding to it. the change is unplanned and occurs after a business is affected by environmental pressures
efficiency
how well a business uses the resources needed to achieve a goal
effectiveness
refers to what degree a business has accomplished the objectives it set out to achieve
key performance indicators
refer to the specific criteria used to measure the efficiency and/or effectiveness of the business’s performance
percentage of market share
refers to the business’ share of the total industry sales for a particular good or service expressed as a percentage
relates to competitive advantage
net profit figures
refers to what remains when expenses are deduced from revenue
relates to costs, profit margins, etc
rate of productivity growth
rate of productivity growth refers to the change in productivity in one year compared to the previous year.
improves by reducing input costs or producing more outputs at the same cost. relates to HR and motivation
number of sales
refers to a measure of the amount of goods/services sold
relates to costs and operations
rate of staff absenteeism
refers to the number of workers who neglect to turn up to work when they’re scheduled to.
relates to HR
level of staff turnover
refers to the number of employees who are leaving the business and need to be replaced
relates to HR
level of wastage
refers to the amount of unwanted/unusable material created by the production process.
helps manage resources and cuts production costs
relates to CSR
number of customer complaints
refers to the amount of customers expressing their dissatisfaction with the business
relates to HR
number of workplace accidents
indicates how safe the workplace is for employees
relates to HR and operations
lewin’s force field analysis
outlines the process of determining which forces drive and which forces resist a proposed change.
a force field analysis helps ensure
the driving forces outweigh the restraining forces
driving forces
those that support the change
restraining forces
those that work against the change
benefits of a force field analysis
businesses can determine whether a change is worth it by calculating ‘fors’ and ‘againsts’, allows additional resource requirements to be identified, identifies inadequate systems
limitations of a force field analysis
weighting of forces is subjective and could be biased, timelines are subjective and may not consider unexpected events, and identification of driving and restraining forces may omit some forces
managers (driving)
managers that are also owners can change and maintain sales, profits, and market share
managers need to ensure shareholders earn a return on their investments and that dividends are paid
employees (driving)
employees working in an innovative environment are likely to recommend changes to policies and procedures
competitors (driving)
business may need to undergo changes to stay relevant to compete with others, pricing policies and new technologies can change because of competitors
legislation (driving)
laws can be passed that stop a business from continuing or starting something
pursuit of profit (driving)
businesses are always chasing profit therefore this is considered a driving force for change
reduction of costs (driving)
if costs rise, profit decreases which will cause a business to change
globalisation (driving)
the movement across nations of investment, tech, and finance brought about by the removal of trade barriers. globalisation makes businesses stay viable and competitive
technology (driving)
allows a business to operate more effectively and efficiently and improves productivity.
niche market
a narrowly selected market segment within a larger market. can be caused by r+d
innovation (driving)
a process where something already established is improved upon. provides a competitive advantage.
societal attitudes (driving)
pressure from society has forced businesses to implement procedures to preserve and protect the natural environment
managers (restraining)
managers may make hasty decisions, may lack experiences to oversee change or handle resistance from various stakeholders
employees (restraining)
new changes may break down corporate culture, employees may be resistant
time (restraining)
external environment may change over time and the change may not be applicable, not enough time is given for people to accept it, businesses are unable to plan the change effectively
organisational inertia (restraining)
refers to an unenthusiastic response from a business to proposed change
legislation (restraining)
the legislation places restrictions on certain operational practices
financial considerations
cost and revenue issues for a business. high costs of change will affect the profit margin.
purchasing new equipment, retraining, etc.
porter’s generic strategies
explains how businesses may seek future growth by pursuing a competitive advantage over other businesses
cost advantage
competitive advantage is gained through reducing/altering the costs of a business
differentiation advantage
competitive advantage is gained through differentiating their good or service from others in the market
lower cost approach
providing average quality products for low costs
will only be an above average performer in its industry if the price for its products is at or near the industry average
strategies for low cost approach
reducing direct and indirect costs, improving efficiency, controlling areas of management and responsibility
advantages of low cost
may save money on costs for expansion, savings can be put towards differentiation, may be able to stop competitors from increasing their market share if they cant match costs
disadvantages of low cost
sales may drop as customers may think of the product as low quality, may lose its market share if other businesses copy the low cost approach, lowering costs now leaves little room for changes later
differentiation approach
providing high quality goods and services for a premium price
product differentiation
refers to the use of factors such as brand names, delivery methods, and advertising to establish differences between substitutable products
strategies for differentiation approach
high quality products, multiple branding, innovation/R+D
advantages of differentiation
improves connection to customers and gains customer loyalty, customer loyalty increases market share
disadvantage of differentiation
differentiation is time consuming and during that time tastes may change, and differentiation has an initial cost that must not outweigh the benefits
