Reviewing Performance - The need for change

Question 1

Change

Answer 1

Change is when a business responds to pressures and adapts or alters its policies, procedures, work environment or structure in order to achieve an objective.

Question 2

Business Change

Answer 2

the adoption of a new idea or behaviour resulting in a difference in the form or operation of a business over time

Question 3

Proactive approach to change

Answer 3

refers to the situation where a change is planned and occurs before a business is affected by pressures in their environment.

Question 4

benefits of proactive approach

Answer 4

business can move at its own pace rather than chase the competition.
Opportunity to increase market share and net profit

Question 5

Reactive approach to change

Answer 5

occurs when a change is unplanned, and takes place after the business has been affected by the pressures from its environment

Question 6

reactive approach benefits

Answer 6

can benefit from the proactive business’s mistakes by learning from the errors.
Statistical evidence can be available, stakeholders then need less convincing of the need for change.

Question 7

disadvantages of proactive

Answer 7

Mistakes can occur and damage reputation as there is little guidance or evidence to follow
Competitor businesses can copy best parts of the change and improve increasing their market share.

Question 8

disadvantages of reactive

Answer 8

By waiting, the business falls behind competitors who have been proactive reducing market share
Employees may feel that the old way was better any may not want to change the way they operate

Question 9

Efficiency

Answer 9

refers to how well a business uses the resources needed to achieve a goal.

Question 10

Poorly managed change results in…

Answer 10

• resistance from workers who don’t understand or value the need for change
• Relationships and trust between management and workers will break down.
• higher staff turnover
• future change unlikely to succeed

Question 11

Effectiveness

Answer 11

indicates to what degree a business has accomplished the objectives it set out to achieve.

Question 12

KPIs

Answer 12

are criteria used as a measure of the success, or the efficiency and effectiveness, of a particular area of the business’s performance.

Question 13

Percentage of market share

Answer 13

refers to the business’s share of the total industry sales for a particular good or service, expressed as a percentage.

Question 14

increase in market share percentage

Answer 14

show a business that its products/services are more popular with customers (sales are increasing relative to competitors) or the competitors are selling less

Question 15

decrease in market share percentage

Answer 15

show a business that its competitors are improving relative to the businesses sales, or the customers are not happy with the quality/price of the products/services or perhaps delivery or customer service levels are poor, thus reducing sales

Question 16

net profit figures

Answer 16

a financial indicator that measures the difference between revenue and expenses over a particular period of time.

Question 17

increase in net profit figures

Answer 17

shows the businesses revenue is greater than expenses or expenses are decreasing (increase efficiency)

Question 18

decrease in net profit figures

Answer 18

their revenue is lower or expenses are higher and therefore the business is losing efficiency

Question 19

rate of productivity growth

Answer 19

measures the businesses efficiency in its use of resources to create outputs by using less inputs with an increase in outputs compared to the past periods performance.

Question 20

increase in productivity growth

Answer 20

means that more goods/services are produced using fewer materials, labor, time, costs which increases efficiency

Question 21

decrease in productivity growth

Answer 21

fewer outputs or rising production costs or longer time to create goods/services. The business will fall behind competitors if they do not maintain/improve productivity growth when comparing previous data to current data.

Question 22

number of sales

Answer 22

measures the number of products sold or services provided to customers within a given period of time.

Question 23

increase in number of sales

Answer 23

increase means there are more customers purchasing products/services which indicates the service has improved/ product quality has improved, etc.

Question 24

decrease in number of sales

Answer 24

indicates poor quality, lack of availability of goods, poor marketing, non-competitive pricing, successful new competitor who steals market share or a change in consumer preferences.

Question 25

number of customer complaints

Answer 25

the number of negative written comments made by the purchasers of goods or services and reported to management to indicate their level of dissatisfaction with the performance of the business.

Question 26

increase in number of customer complaints

Answer 26

indicates that there is dissatisfaction with the goods/services of the business. Could be due to poor quality or poor service and could impact by decreased sales and damage to reputation.

Question 27

decrease in number of customer complaints

Answer 27

greater customer satisfaction with the quality of goods and services which could/should lead to increased sales and market share

Question 28

rate of staff absenteeism

Answer 28

measures the number of days that employees are scheduled for work but do not attend.

Question 29

increase in staff absenteeism

Answer 29

poor staff satisfaction, morale/corporate culture (poor) no loyalty to the business, poor staff selection, poor relationships between management and employees.

Question 30

decrease in staff absenteeism

Answer 30

indicates staff are happier, more loyal to the business, improved relationships with management and available to work which increases productivity, increase morale and increase corporate culture.

Question 31

level of staff turnover

Answer 31

measures the number of staff who leave the business and are replaced over a given period of time.

Question 32

increase in staff turnover

Answer 32

indicate poor staff satisfaction, better pay or conditions in a rival business, morale/corporate culture (poor) no loyalty to the business and it is very costly to rehire staff constantly.

Question 33

decrease in staff turnover

Answer 33

indicates success as staff do not wish to leave and are happier and loyal to work which increase productivity, increase morale and increase corporate culture and decreases re-employment costs.

Question 34

Number of workplace accidents

Answer 34

the number of interruptions to workflow caused by injuries or property damage sustained during the production process.

occur due to:
old or faulty equipment
poorly trained employees
dangerous nature of work tasks
unsafe working practices.

Question 35

increase in number of workplace accidents

Answer 35

indicates lack of safety, danger and lower morale and decreased loyalty from employee’s and lower productivity and increase costs (medical, legal and staff turnover costs)

Question 36

decrease in number of workplace accidents

Answer 36

indicates better care by management for their employees that increases morale and productivity and lowers costs

Question 37

level of wastage

Answer 37

measures the amount of unusable materials created that are not converted to outputs during the production process.

Question 38

increase in level of wastage

Answer 38

indicates poor use of resources, decrease of productivity and costs will increase. Raw materials are wasted and disposal costs increase potentially harming the environment

Question 39

decrease in level of wastage

Answer 39

indicates improved use of resources, lower costs or time to produce goods and services and a decrease in disposal costs and reduced harm to the environment.

Question 40

number of website hits

Answer 40

is the amount of customer visits that a business’s online platform receives for a specific period of time

Question 41

increase in number of website hits

Answer 41

model their online presence so that customers can navigate it comfortably and efficiently, which may provide greater opportunities for sales.

Question 42

decrease in number of website hits

Answer 42

may suggest a business has a poorly developed online platform that does not entice customers to engage with the business or in online purchasing.

Question 43

Driving forces

Answer 43

are those forces that initiate, encourage and support the change — they work to assist the business in achieving its goal.

Question 44

restraining forces

Answer 44

are those that work against the change, creating resistance — in other words, they hinder the achievement of the goal.

Question 45

What is a force-field analysis?

Answer 45

a theoretical model that determines if businesses should proceed with a proposed change.

Question 46

Force-field analysis - a business can only implement change when…

Answer 46

can only move out of equilibrium when the support for the driving forces overcomes the power of the
restraining forces leading to successful change.

Question 47

benefits of a force-field analysis

Answer 47

allows a timeline to be developed and additional resource requirements to be identified.
can identify inadequate systems so a re-design of systems can be undertaken.
able to weigh up the factors ‘for and against’ and whether the change is worth undertaking.

Question 48

disadvantages of a force-field analysis

Answer 48

The weightings of the forces are subjective, biases can emerge.
Timelines can also be subjective and may not consider unexpected events.
Assigning responsibility to people to manage aspects of the change may result in a need for training as the skills of people may be lacking or overestimated.

Question 49

all driving forces?

Answer 49

innovation
societal attitudes
owners and managers
employees
technology
competitors
globalisation
reduction of costs
pursuit of profit
legislation

Question 50

owners
internal

Answer 50

• vested interest in the ability of their business to meet its objectives and continue to adapt.
• may actively seek out and support change
  in order to remain competitive.
• act as a driving force if they believe change is beneficial to future business performance.

Question 51

managers
internal

Answer 51

are employees who hold positions of responsibility/authority within the business.

• Initiating the change
• Supporting the change, motivating and inspiring employees to do the same
• Preparing for the change by ensuring that the leadership and management across the business are all clear about the changes required

Question 52

employees
internal

Answer 52

those who provide their labour to
the business in exchange for remuneration.

• If employees support the change and are
  happy to implement it the business is likely to
  find success.
• Employees can also act as a source of the
  change by creating new ideas and technologies

Question 53

Pursuit of Profit
internal

Answer 53

desire to increase revenue and/or decrease expenses.

• Profit needs to be sustained over time to ensure that the business can continue to grow.
• continual pressure to increase profit, particularly from shareholders expecting high share prices and dividends.
• If the KPI of net profit is lower than forecasted, previous years or competitors.

Question 54

Reduction of costs
internal

Answer 54

minimising expenses such as costs of supplies, wages, financing.

• All businesses focus on reducing costs as this will often support generation of profit even if revenue or sales cannot be increased.
• If costs are increasing, this will drive the business to implement strategies to change this.

Question 55

Competitors
external

Answer 55

refer to business rivals who sell similar products/services in the same industry.

• Businesses being aware of the need to quickly respond to any competitor’s changes to ensure they do not lose customers or market share.

Question 56

legislation
external

Answer 56

Legislation refers to laws created by the local, state and federal governments.

• Businesses must adapt their policies and practices to ensure they are abiding by the new laws.
• Legislation will drive a business to change in order to ensure safety and correct, ethical and legal behavior is maintained within the business

Question 57

globalisation
external

Answer 57

means that businesses are operating on a global
scale due to the removal of trade barriers.

• giving increased access to markets around the world
• allows for broader scope for choice of suppliers and inputs (decreasing costs)
• increasing competitors, therefore the business must be conscious of keeping up with the global market

Question 58

technology
external

Answer 58

machinery or equipment created through scientific knowledge.

-New technology will allow a business to outperform rivals in the industry and dominate market share
- Technology allows a business to operate its processes and practices more efficiently and effectively, cutting costs and improving productivity.

Question 59

Innovation
external

Answer 59

refers to the process of altering and improving or creating new products or procedures which can increase the likelihood of a business succeeding.

• Being able to innovate and develop new ways of thinking and increases competitive edge.
• research new ideas and be aware of steps that competitors are taking to innovate and capture greater market share.

Question 60

Societal Attitudes
external

Answer 60

values, opinions and trends of the community as a whole that influence their behaviour.

• New opportunities are developing for businesses that understand the changing attitudes, lifestyles and values of modern society.
• importance of flexible work practices
• importance of supporting local, Australian-made goods and services

Question 61

all restraining forces

Answer 61

managers
time
organisational inertia
employees
legislation
financial considerations

Question 62

managers (restraining)

Answer 62

They may feel the change threatens their current position, power or role.
They do not have the skills and experience to deal with the process.
May resent if they did not have input in the decision of change

Senior management may introduce a change which is not successful due to middle or front-line managers refusing to implement it or failing to actively support it (passive resistance).

Question 63

employees (restraining)

Answer 63

Feeling unappreciated or disconnected from the business
Confusion over the changes
Employees may be fearful of change if it threatens their job status/security

Question 64

Time

Answer 64

the amount of time available to make informed decisions and implement the change.

• insufficient time to make the change. Change may take a long time to implement properly and may require training and extensive planning.

-wrong time to implement a change. It could either be the wrong time in the year or wrong time in the economy.

Question 65

organisational inertia
If restraining forces are equal to or greater than driving forces, ‘organisational inertia’ will occur.

Answer 65

“the tendency of a business to remain static rather than implement change”

• The lack of ability of a business to react to internal and external pressures for change as it tends to continue on its well entrenched way.
• Businesses that are stable with traditions and long history that are not used to change
  Some businesses are very conservative which may make change problematic.

Question 66

legislation (restraining)

Answer 66

finds that it has to manage a change in the law that is unexpected, expensive or difficult to implement, it will be harder for that business to respond positively.

Question 67

financial considerations

Answer 67

will restrain change if it hasn’t budgeted for the change or if it does not have enough resources to move forward with change.

Costs of developing new policies/procedures and loss of productivity as the business researches, holds meetings, gains input and support, communicates and educates employees

Question 68

Supplier Power

Answer 68

a business should assess how easy it is for suppliers to drive up prices. The smaller the number of potential suppliers for a business or the more unique the supplier’s product, the more power suppliers tend to have over the business.

Question 69

Buyer Power

Answer 69

this looks at how easy it is for buyers to drive down prices. It is driven by the number of buyers, the importance of each individual buyer and the cost to them of switching from the business’ product to another. If there are a few powerful buyers, then the power lies with them not the business.

Question 70

Threat of substitution

Answer 70

this is affected by the ability of customers to find a similar product or service. If substitution is easy then power and influence is reduced.

Question 71

Threat of new entry

Answer 71

a business’ influence and power is affected by the ability of other businesses to enter the same market and competing. If entry costs are relatively low, new competitors can quickly enter the market and take away customers. This limits the ability of a business to raise prices without losing customers.

Question 72

Competitive rivalry

Answer 72

focuses on the number and capability of competitors. If there are many competitors with equally attractive products and services, then the business will have limited power and customers can go elsewhere. If the product is unique then the business has a great deal of power and can raise their prices without fear of losing significant market share.

Question 73

Lower cost strategy

Answer 73

strategy to achieve a competitive advantage by reducing production or delivery costs to become the lowest cost producer.

Question 74

Lower cost strategy explanation

Answer 74

Businesses will often do this by appealing to cost-conscious customers:.
Resulting rivalry can result in a lack of profitability in the entire industry

There are three main ways of achieving low costs:
Improving efficiency- minimising idle stock on shelves, using assets more efficiently
Reducing direct and indirect costs- by reducing wages, educing the cost of interest
Controlling areas of management responsibility- a business might check and review areas

Question 75

Advantages of lower cost

Answer 75

A business may become more profitable, as profit per unit can increase.

A business may save money on some costs to allow expansion or development of new lines.

Savings can be put towards differentiation at a later date.

Question 76

Disadvantages of lower cost

Answer 76

Sales may fall as customers may perceive a product as being of poor quality.

A business may lose its market share if other businesses copy the low-cost approach.

Lowering costs now means there is little room to make changes in the future.

Question 77

Differentiation

Answer 77

strategy to achieve a competitive advantage by selling a unique product targeted towards satisfying one or more attributes that customers consider important to increase its perceived value and can therefore charge a price premium.

Question 78

Differentiation strategies

Answer 78

high-quality products — by ensuring that quality is better than that of competitors eg, more reliable/durable

multiple branding — by providing different brands or more brands in the same market to cater to a wide range of customers.

innovation/research and development — developing a product with unique features that no other business currently produces.

Question 79

differentiation advantages

Answer 79

improve the way a business connects with customers, and can develop customer loyalty.

If able to charge a premium price, the business can make revenue gains.

By developing customer loyalty, market share can be increased.

Question 80

differentiation disadvantages

Answer 80

Rival businesses can copy the differentiated approach, negating any gains.

Differentiation has an initial cost that must not outweigh the benefits.

Differentiation can be a time-consuming process, and, during that time, consumer tastes or preferences may change.

Question 81

similarities of lower cost and differentiation

Answer 81

both have the same goal to gain the business a competitive advantage so as to increase market share and profit

can be applied to products and services

require ongoing investment from the business to be successful in the long term.

Question 82

differences of lower cost and differentiation

Answer 82

low cost products may be below industry average prices whereas with differentiation products are sold at a premium price

differentiation involves significant investment into innovation while lower cost involves investment into cost reduction

differentiation involves appealing to brand loyalty and attractiveness seeking consumers while lower cost appeals to price conscious consumers.

Question 83

Weighting

Answer 83

process of scoring and attributing a value to the driving and restraining forces.

• enables the business to assign a ‘weight’ to determine the level of impact each force can potentially have on the change.
• involves assigning a numerical score between 1 to 5
• The weight attributed to each force can depend on the degree to which the force is affected by the change.

Question 84

Ranking

Answer 84

involves arranging the forces in order of value and
determining the total score of driving and restraining forces.

Ranking helps determine which driving forces could
most easily be strengthened further, and which restraining forces are most important to be
removed or minimised.

Question 85

Implementing a response

Answer 85

whether a business should implement a response dependent on if driving or restraining forces are stronger.

this principle of implementing a response refers to the action that can be taken to strengthen the driving forces, reduce or eliminate the restraining forces, and/or the actual execution of the change.

An action plan needs to be developed that details what needs to be done, who is responsible, the resources required, and deadlines for task completion can be created to support the implementation of the change.

Question 86

Evaluating a response

Answer 86

involves determining whether or not the change has been successfully implemented.
The principle of evaluating the response refers to comparing the actual change to the anticipated change and determining whether further action needs to be taken.

However, if the evaluation of the change is negative,
the Force Field Analysis may need to be redone, because forces may have strengthened, weakened, or changed.

Question 87

Porter’s Generic Strategies

Answer 87

Michael E. Porter is a US-born professor in the 1980s developed a theory that is still used today. The theory attempted to explain how businesses may seek future growth by pursuing a competitive advantage over other businesses