Lesson 4 - KPI’s Flashcards
5 KPI’s
Percentage of market share
Net profit figures
Number of sales
Level of wastage
Rate of productivity growth
What does a KPI allow a business to do?
- Gather info about current performance of the business
- Set objectives
- Inform and initiate change
- Evaluate change
Limitations of KPI’s
Essential that performance indicators can relate to objectives and strategies
KPI’s won’t tell you exactly what to change but they will provide and indication as to where and what managers need to investigate
KPI’s require and initial benchmark for comparison
Number of sales KPI
Total quantity of a particular product or service purchased during defined time period
What can it indicate: measures success of marketing campaigns, sales training and product innovation. The most popular or unpopular products
E.g sales of mango juices twice as high as banana juices
Percentage of Market share KPI
A representation of the proportion of sales that a business has compared to the total sales for the industry or product, expressed as a percentage
What can it indicate: level of sales control in the market place, improved quality or price compared to your competitors
If sales drops - inform whether sales have dropped b/c more competitive or market is shrinking (less demand)
If sales increase - inform that organisation has become more competitive or demand for product has increased
Net profit KPI
Net profit figures are calculated by deducting total expenses from total revenue
What it can indicate: capacity of organisation to use its resources to maximise its profits, whether selling price is right, increasing revenue or reducing expenses
Rate of productivity growth KPI
Compares the amount of output produced to the amount of input going into production from one defined time period to the next
What it can indicate: organisation is using resources more efficiently, the organisations is using fewer inputs to obtain the same output or output is produced from the same input
Level of wastage KPI
The amount of resources discarded by the business during the production process
What can it indicate: reduction of waste means that an organisation can cut costs leading to greater profit, higher levels for waste can indicate a negative impact on the environment
