reviewing performance Flashcards
change
any alteration in the internal or external enviornments.
business change
the adoption of a new idea or behaviour by a business.
competitive advantage
a firm, industry or economy having a lower cost price structure than its rivals.
proactive approach
situations where a change is planned and occurs before a business is affected by pressures in their environment.
reactive approach
situations where a change is unplanned, taking place after a business has been affected by the pressures in their environment.
efficiency
how well a business uses resources to achieve objectives.
effectiveness
the degree to which a business has achieved its stated objectives.
key performance indicators (KPIs)
a specific criteria used to measure the efficiency and / or effectiveness of a business’ performance.
key performance indicators as a source of data
- percentage of market share
- net profit figures
- rate of productivity growth
- number of sales
- rate of staff absenteeism
- level of staff turnover
- level of wastage
- number of customer complaints
- number of website hits
- number of workplace accidents
percentage of market share
the business’ share of the total industry sales for a particular good or service, expressed as a percentage.
net profit figures
the measurement of the difference between revenue and profit.
rate of productivity growth
the change in producitivity in one year compared to the previous year.
productivity
a measure of performance that indicates how many inputs it takes to produce an output.
number of sales
a measure of the amount of goods and services sold.
rate of staff absenteeism
the number of workers who do not turn up for work when they are scheduled to do so.
level of staff turnover
the number of employees leaving the business and needing to be replaced.
level of wastage
the amount of unwanted or unusable material created by the production process of a business.
number of customer complaints
the amount of customer expressing their dissatisfaction with the business, in either spoken or written form.
number of website hits
the amount of customers viewing the online site.
number of workplace accidents
an indication of how safe the workplace is for employees.
force field analysis (FFA)
the process of determining which forces drive and which forces reisst a proposed change.
driving forces
forces that support a change.
restraining forces
forces that work against a change.
benefits of FFA
- businesses can weigh up factors for and against change
- allows stakeholders to identify changes as positive or negative
- businesses can figure out how to strength driving forces or reduce / eliminate restraining forces
limitations of FFA
- can be difficult to identify whether some forces are driving or restraining, some may not be considered until later
- weightings of forces are subjective
- timelines can be subjective and irrespective of unexpected events
driving forces for change
internal:
- reduction of costs
- pursuit of profit
- employees
- owners
- managers
external:
- innovation
- technology
- globalisation
- legislation
- competitors
- societal attitudes
owners and managers reason for encouraging change
want the business to remain profitable and competitive
employees reason for encouraging change
want to work in a supportive and innovative environment where they are free to suggest ideas
competitors reason for encouraging change
if changes are unsuccessful, there is fear of loss to a rival
legislation reason for encouraging change
changes to the law can impact operational practices so the need for change is greater
pursuit of profit reason for encouraging change
business owners want a greater profit because there will be greater rewards
reduction of costs reason for encouraging change
reducing costs of operating a business can increase profit made
globalisation reason for encouraging change
wanting businesses to be able to compete with overseas competitors
technology reason for encouraging change
allows businesses to operate processes and practices more efficently and effectively
innovation reason for encouraging change
the drive and desire to be a market leader
niche markert reason for encouraging change
a narrowly selected market segment within a larger market.
societal attitudes reason for encouraging change
the need to reflect societal values can drive change
restraining forces for change
- managers
- time
- organisational inertia
- employees
- legislation
- financial considerations
managers reason for restraining change
poor decision making or fear of loss of control / power
employees reason for restraining change
fearful of changes that threaten job security or require new work routines
time reason for restraining change
either poor timing or lack of time can make change more difficult to achieve
organisational inertia
the organisation’s inability to make internal changes or lack of response when faced with significant external changes.
organisational inertia reason for restraining change
prefer to stay with the safe and predictible status quo
legislation reason for restraining change
restrictions placed on certain operational practices
financial considerations reason for restraining change
financial costs of implementing major changes can be substantial
generic strategies approach
- lower cost strategy
- differentiation strategy
cost advantage
a competitive advantage gained through reducing the costs of the business, allowing it to operate with larger profit margins compared to its market rivals.
differentiation advantage
gaining competitive advantage through differentiating goods or services from others in the market.
porter’s five forces analysis
- supplier power
- buyer power
- threat of substitution
- threat of new entry
- competitive rivalry
buyer power
how easy it is for buyers to drive down prices.
e.g. number of customers, size of customer orders, price sensitivity
supplier power
a business should assess how easy it is for suppliers to drive up prices.
threat of substitution
ability of customers to find a similar product or service.
threat of new entry
the ability of other businesses to enter the same market.
competitive rivalry
number and capability of competitors.
cost leadership
businesses seeking to have the lowest costs in its industry.
strategies to lower cost
- reducing direct and indirect costs
- improving efficiency
- controlling areas of management responsibility
examples of businesses using a lower cost strategy
- costco
- aldi
- jetstar
- kmart
- IKEAad
advantages of lower cost strats
- busines may become more profitable as profit per unit can increase
- business can precent competitors from increasing their market share
- business can save money on some costs to allow for expansion or development of new lines
- savings can be put towards differentiation at a later date
disadvantages of lower cost strat
- sales may fall as customers perceive producs as poor quality
- business may lose market share if other businesses copy the same approach
- lowering costs means there is no room to make changes in the future
product differentiation
use of factors such as brand names, delivery methods and advertising to establish differences between substitutable products.
differentiation
a strategy to achieve a competitive advantage by selling a unique product targeted towards satisfying one or more attributes that customers consider important.
strategies to implement differentiation
- high quality products
- multiple branding
- innovation / research and development
advantages of differentiation strategies
- can improve the way a business connects with customers, and can develop customer loyalty
- if able to charge premium price, business can have revenue gains
- developing customer loyalty can increase market share
disadvantages of differentiation strategy
- rival businesses can copy the approach negating gains
- differentiation has an initial cost that should not outweigh benefits
- higher selling products can deter cost conscious customers
- can be time consuming and market preferences or tastes can change
