sac 4 - AOS 1 reviewing performance - the need for change Flashcards
analysing business performance
> businesses measure their performance through key performance indicators
data gathered from kpis informs managers about the effectiveness and efficiency of different areas of the business
kpi data allows managers to make more informed decisions
key performance indicators (9)
>percentage of market share >net profit >rate of productivity growth >number of sales >rates of staff absenteeism >level of staff turnover >level of wastage >number of customer complaints >number of workplace accidents
benchmarking
benchmarking is being able to compare results against some sort of standard
percentage of market share
a businesses share of the total sales in an industry for a particular good or service, expressed as a percentage.
calculated by number of sales of business divided by total number of sales in the industry.
net profit
the amount of money left over after expenses have been deducted from revenue earned
rate of productivity growth
the amount of inputs used and the rate in which it increases over time
number of sales
the amount of goods or services sold in a specific period o time.
rate of staff absenteeism
the number of employees that do not turn up to work when expected to be there
level of staff turnover
the rate in which people leave the business and need to be replaced
level of wastage
the amount of recourses and finished goods that are discarded during the production process
number of customer complaints
the amount of people that are dissatisfied and or its products and have notified the business of their dissatisfaction
number of workplace accidents
the amount of people injured or nearly injured at work due to unplanned events
change management
> business change is the adoption of a new idea or behaviour by a business which is a result from pressures from the business environments. this means alteration of the business must take place.
business environments include factors such as economy, customers, employees, technology, competitors
examples of business change
> woolworths and coles plastic bag ban- woolworths 20th coles 30th june 2018
driving forces
- societal attitudes- society is becoming more environmentally friendly
- competitors for coles as woolwoths implemented the ban and coles didn’t want customers to go to competitor for more environmentally friendly shopping
- reduction of costs
- persuit of profit
restraining forces
-organisational inertia as business may be scared that customers wont like the decision and resent the business
>dominos pizza checker- quality control to satisfy customers ad improve quality- may 2019 >driving forces -technology -competitors -innovation >restraining forces -employees as they may need training or fear of using new technology -financial considerations -
incremental vs transformationsal change
incremental - small continuous changes that occur regularly in the business
eg new process to improve efficiency
transformational - significant changes that are often impacting the whole business
eg a company restructure or a merger
distinguish- the difference between transformational and incremental change is the size and impact of the change. incremental change is small continuous changes that occur regularly in the business with smaller impacts, whereas transformational changes are significant and often impact the whole business.
proactive vs reactive
> it is important that business are proactive rather then reactive
proactive means seeing changes in the dynamic environment and taking advantage.
reactive mean letting the business environments (economy, customers, employees, technology, competitors) impact the business before making changes
driving forces (10)
driving forces are those factors that initiate or support change.
>driving forces push the business towards a new desired state
>include managers, employees, technology, innovation, pursuit of profit, reduction of costs, legislation, globalisation and societal attitudes, competitors
managers (d)
> managers can initiate change after reviewing kpi data
>managers that are strong leaders can help drive the business towards the change
employees (d)
> employees can drive change through innovation
they can place demands on the business to change conditions, policies and processes as they are the ones affected by change
competitors (d)
> many industries are highly competitive
>competitors can drive a business to implement changes to gain a sustainable competitive advantage
legislation (d)
> changes in laws can force a business to implement change.
legislation can change at federal, state or local level
eg changes to penalty rates in some industries
pursuit of profit (d)
> businesses that are looking to increase profits, may implement changes to the business
eg marketing campaigns, expansions, or new product lines
reduction of costs (d)
> costs eat into profit margins
reducing costa can help a business become more profitable
a business that has high costs can initiate change
globalisation (d)
> globalisation is the process where economic boundaries are removed ad business begin operating on an international scale.
increases global competition
allows businesses to take advantage of global markets
technology (d)
> technology can impact all parts of a business
>businesses may need need to implement technology to remain competitive.
innovation (d)
> innovation is adopting something new or improving on what already exists
this could include
- new production process
- new or improved products
societal attitudes (d)
> societies attitudes are constantly changing
>businesses that fail to keep up wth these attitudes risk falling behind
restraining forces
> restraining forces are those factors that work against a proposed change
restraining forces make it difficult for the business to implement change successfully
businesses can look to reduce the impact of the restraining forces to help the change be successful
include; managers, employees, organisational inertia, financial considerations, legislation, time
managers (r)
> managers on all levels can act as a restraining force against change
eg middle or lower management may not support changes proposed by senior management or managers may not have the ability to lead a business through change
employees (r)
> employees are the ones most impacted by the change
change can bring on feelings of fear and anxiety within employees causing resistance
if employees feel they havent been consulted or do not feel appreciated may look to resist change
change may have a negative impact on employees eg loss of employment
time (r)
> businesses may find a lack of time will impact their ability to implement change successfully
businesses may be under pressure from competitors or in a poor financial position and need to act quickly
organisational inertia (r)
> organisational inertia is a businesses lack of ability to respond to pressures and embrace change
cultures or management that are unenthusiastic to change can make it difficult to gather momentum towards the change
conservative or stuck in tradition
legislation (r)
> legislation may block or make it difficult to implement change
tis can increase the costs of implementing a change
eg the acc may block a proposed merger if it feels it will reduce competition in the market
financial considerations (r)
> the immediate and long term costs of a proposed change may make it difficult for the change to be implemented successfully
lewins force felid analysis theory
a process of identifying and analysing driving and restraining forces that affect a proposed change.
steps;
>identify driving forces
>identify restraining forces
>analyse ad rank each driving and restraining force due to how significantly they impact the change
>create an action plan to reduce strength of restraining forces or increasing strength of driving forces
- if driving and restraining equal then not likely to be successful
- if restraining forces are higher then dont implement
- if driving forces are higher then implement
advantages of force feild analysis theory
> managers are able to identify and analyse the forces for and against the change
helps determine if the change is worth pursuing
allows managers to develop ways of reducing the restraining forces eg training
allows actions and timelines to be developed
identifies stakeholders that will likely be supported of the change and those that may resist the change
porters generic strategies
> porter found that business are able to gain a competitive advantage by focusing on generic strategies
include lower cost strategy and differentiation strategy
only should use one strategy EITHER low cost OR differentiation but cannot completely ignore each other
lower cost strategy
> where a business is able to gain a a competitive advantage by becoming THE low-cost producer in its industry eg aldi
businesses can achieve this in a number of ways, including;
- achieving economies of scale
- implementing technology
- preferential access to raw materials
by becoming the low cost producer, businesses can gain advantage in two main ways;
-sell the good/service at or near the industry average, and therefore increasing the profit margins
-prices can be reduced to become more attractive to the price sensitive customer
it is important that are deducting costs doesn’t affect the quality
ADVANATGES
>strong competitive advantage in markets with ‘price conscious’ consumers
DISADVANTAGES
>potentially lower customer loyalty as customers are only price sensitive
>potentially customer may associate lower price with lower quality
>standardised goods and services will not meet the demands of customers who want unique, customer specific offerings or something different.
differentiation strategy
> the differentiation strategy is where the business aims to be unique in its industry in some way that is valued ny its customers
this allows businesses to charge a premium price for the product
customers are attracted to a unique offering
differentiation can be achieved in a number of ways including;
- high quality materials
- patents
- marketing
- relationships
- innovations
- training
- distribution
ADVANTAGES
>strong competitive advantage in markets with brand loyalty
>can change to premium pricing as the cost is not such an important consideration to consumer
>can work wth large businesses who have money to create a brand image
>can work with small businesses who create a unique point of difference
DISADVANTAGES
>is not good for price sensitive consumers/markets
>the unique features can be copied or mimicked by other producers domestically or overseas which destroys competitive advantage
>can be hard to protect your intellectual property, copyright etc
five competitive forces
> when deciding which strategy to implement, porter stares that businesses should understand the competitive forces that make up their industry
five competitive forces;
- supplier power: how easy it is for customers to drive costs up
- buyer power: how powerful buyers are in riving prices down
- competitive rivalry: looks at the number and capability of competitors
- threat of substitution: how easy it is for new competitors to find a similar good or service
- how easy it is for new competitors to enter the market
which generic strategy?
1. analyse the competitive forces
2. determine what the businesses strengths are
3. compare the strengths to the competitive forces
4. decide the most appropriate strategy
