U4 AOS1 T2 Flashcards
list the 10 driving forces
managers employees competitors legislation pursuit of profit reduction of costs globalisation technology innovation social attitudes
what is a managers (driving) responsibility
Managers have the responsibility of operating a profitable or successful business, through the use of various management styles and skills.
drive that a manager (driving) provides
The personal “drive” that a manager provides to initiate and maintain the momentum of the change.
what does a manager(driving) share
They will also share their vision and try and get others inspired to change by being role models.
eg. of managers (driving) being a driving force
For example, when Wesfarmers Limited took over the poorly performing Coles in 2007, management implemented a five-year recovery process.
how will employees (driving) be a great force for change
If employees support and are happy with the change
how will employees (driving) be important in a change
They are able to influence others and through empowerment, or employee centred management styles and skills, can have an active role in pursuing change.
what are the employee (driving) expectations
Employees working for a business expect to be paid fairly, trained properly and treated ethically in return for their vital contribution to production, Empowerment and performance related pay.
when can innovative employees (driving) thrive
Some innovative employees can thrive in a laizzes-faire/participative environment, if they are disciplined and have knowledgable of the change.
with competitors, what is needed to be done by the business, and what drives that force
A business needs to respond to the actions of competitors or risk being left out of the industry. The pursuit of a competitive edge is a constant driving force.
to determine the effect that competitors have in the market what is needed to be done
Businesses need to monitor the activities of their competition and determine what effect they may be having in the marketplace.
what are competitors useful for
Competitors are used for comparison and benchmarks. marketing such as Pricing strategies and advertising campaigns, adoption of new technologies,
how is legislation a driving force + eg
Businesses need to respond to local, state and federal governments who may bring in legislation that they need to address. E.g. minimum wages, equal opportunity, anti-discrimination, OH&S legislation. And
these court rulings, can change legislation which again businesses are forced to comply with and respond to.
how is pursuit of profit a driving force
Profit is one of the key objectives of a business and therefore the pursuit of it is a major driving force for business managers and owners. Also All businesses, regardless of size, need to earn a profit, of which they return a portion to owners/shareholders.
what needs to be done when the pursuit of profit is not being succeeded
If the profit levels of a business are not as high as the management team have identified as their goal it is likely they would need to make changes to either generate more revenue or decrease their costs to earn the pro t that allows them to achieve their goals.
how is the reduction of costs a driving force
Reduction in costs in marketing, production, human resources, raw materials, staffing etc. are often a key driver of change and can create quick improvements to the bottom line.
what may drive the business to change (reduction of costs)
If costs are rising then profit will be negatively impacted and as such may drive the business to change
strategies for changing the reduction of costs for the best 3
source cheaper materials/supplier
local supplier ~ avoid import payments
reduce wages ~ downsize or replace labour with tech
how is globalisation a driving force
The increase in global trade, communication and transportation on a global scale creates many drivers for business to change.
how does globalisation lead to change
Some businesses may be exposed to global competitors, or have global opportunities to expand into global markets through free trade agreements, and expanding internet and electronic communication channels. And
Others may be driven to seek global manufacturing options to reduce labour costs, outsourcing or obtain raw materials from around the globe based on quality and price
how is technology a driving force
Technology allows a business to operate its processes and practices more efficiently and effectively, cutting costs and improving productivity. As such technology, and any advances in technology, should be considered as a driving force for change.
why is adapting to technology important
If a business is slow to exploit technology, a business is likely to fail, because its competitors will strive to capture greater market share and develop a sustainable competitive advantage.
examples of adopting to technology for manufacturing companies
Manufacturing – robots / automation / 3D printing / Airbus / car manufacture
examples of adopting to technology for a service company
Services & External Communication – internet / mobile phones, GPS, applications – Facebook, augmented / virtual reality
what is innovation and how is it a driving force
Is the introduction of new products, modifying existing ones, adapting business methods or business activities and is a major source of competitive advantage for business and therefore a strong driving force for change.
how can innovation be driven
can be driven by technological advances and by globalisation.
what can innovation be a result of
Innovation can result from research and development undertaken by businesses or through individuals identifying areas for improvement. can also result from the identification of a niche market.
what are societal attitudes
Society’s attitudes to what is right and wrong are constantly changing and this affects the ways in which businesses operate.
how are societal attitudes a driving force
Society requires that large businesses sell acceptable products and treat staff with respect.
what is a niche market
is a narrowly selected market segment within a larger market.
what is an internal environment
internal environment refers to the factors inside the business.
what is an external environment
includes those things over which the business has little control. It may be divided into an operating environment and a macro environment.
what is the operating environment
refers to the outside factors with which the business directly interacts in the course of conducting its business.
what is the macro environment
is made up of the broad factors in the economy and society within which the business operates
how can a manager be a restraining force
If a manager is not convinced by the change, or fear it may threaten their position they can act to seriously inhibit the chances of its success, by negatively influencing the employees, not prioritising the change tasks, or ignoring them completely.
ways managers can be restraining forces
Some managers may make hasty decisions that are poorly timed and unclear. Other managers may be indecisive and put off making a decision, creating uncertainty. Either of these situations may eventually cause employees to lose confidence in the decision- making abilities of management.
what changes have the strongest resistance and what does it result in
Changes that threaten to eliminate jobs usually face strong resistance. For example, most business restructuring involves the elimination of some middle management positions. Consequently, middle managers may resist restructuring.
how can employees be a restraining force 5
This can be a major source of resistance if employees: • fear for the unknown •
fear for their job security •
fail to see a reason to change. +
cannot adapt to the new procedures, which threaten established work routines
why is communication and support (interpersonal skills) essential in change
Change can be emotional and disorientating and the appropriate level of communication training and support need to be given to employees to overcome this force.
The introduction of a major change, such as a merger or acquisition, may result in:
a complete breakdown of the existing corporate culture. This can create a feeling of mistrust and suspicion among the employees.
how can time be a restraining force
sometimes businesses do not have the time to plan the change as efficiently and effectively as they would like and In some circumstances, not enough time is allowed for people to think about the change, accept it, and implement it. In other situations, the timing is poor.
why is time an impossible barrier eg.
If a competitor moves into an industry then ideally the business would like to respond as quickly as possible. However sometimes the time required to change business operations, procedures or even products and services can be significant.
what is organisational inertia
refers to management’s inactivity or lack of response when faced with proposed changes.
when does operational inertia occur
This often occurs in stable, traditional businesses where holding on to long held traditions make it too hard to bring about change.
how is organisational inertia a restraining force
Some managers resist change because it requires moving outside and away from their ‘comfort zones’.
how is legislation a restraining force
Legislation can sometimes make it hard for businesses to change in they way they may want to. An example of this is foreign ownership laws preventing Australian businesses seeking major overseas investment.
when does legislation being a restraining force occur
This occurs when the legislation places restrictions on certain operational practices and procedures. For example, a mining company wanting to exploit a new mineral resource will have to do so within the limitations of current environmental protection legislation.
how is financial considerations a restraining force
A very obvious restraining force is that whilst the business may have the intentions to change, if it can’t find the finances to pay for these changes then the changes themselves are unlikely to occur as envisioned. This can be especially true for small businesses.
Even given sufficient finances, a business contemplating change must weigh up the costs and benefits of the change such as:
purchasing new equipment
Redundancy payments
retraining the workforce
reorganising plant layout
what is the proactive approach known as strategic management
Businesses can wait to see how driving and restraining forces build around them and respond to them in a reactive way. However businesses can also seek to “shape their own destiny” and plan for the future they want to position themselves in. This proactive approach is called strategic management and one example of such an approach is Porter’s generic strategies.
what is Michael Porter’s strategic management theory
Michael Porter’s theory is a strategic management theory which describes how a business can seek to acquire a competitive advantage in its industry or market and therefore dominate that industry or increase its market share in it. It is therefore a very proactive theory which has two underlying concepts
what are the two underlying concepts of Michael Porter’s strategic management theory
The first is that this is a generic strategy which means that it can be applied to any business or industry.
The second is that a business needs to identify, focus and build on its strengths. These are its “competitive advantages” and tend to be in one of two categories:
what are the two competitive advantage categories
lower cost
differentiation
what two avoid when selecting one of porter’s strategies
porter states that they should select one strategy rather than risk being mediocre at both
this is called being “suck in the middle’ where businesses are mediocre at both
how does lower cost offer a competitive advantage
This will give them a competitive advantage in that they can now sell their products at a cheaper more “customer attractive” price than their rivals whilst still maintaining their profit margins and thus increasing sales and market share. This appeals to “price conscious” consumers.Eg. Aldi, Costco
what can happen if the lower cost strategy is successful
can become a cost leader and change the prices that is near the industry average
how can businesses undergo the lower cost strategy
business can assess each activity in the value chain to see where costs can be reduced
In order to achieve this “competitive advantage” managers must look a range of cost saving measures
examples of the business undergoing the lower cost strategies 9
Economics of scale Eg. bulk buying - Aldi
high volumes of standardised goods/services “no frills” - jetstar, Ikea
new tech to produce goods services quicker/cheaper/less waste - CUB
Lean production strategies
global sourcing
overseas manufacturing
dismiss employees ~ less overheads
materials management strategies - JIT
Preferential access to raw materials
advantage of lower cost strategy (1
• Strong competitive advantage in markets with “price conscious” consumers.
disadvantages of lower cost strategy (3
Potentially lower customer loyalty as customers are only price sensitive. •
Potentially customers 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 who want something “different”.
what is the strategy of differentiation
A business manager decides that their strength is to be more innovative and creative than their competitors and create goods and services that have a unique point of difference to their competitors. This differentiation will make their goods or services more “customer attractive” thus increasing sales and subsequently market share.
how can the differentiation strategy be created through (9
innovation leading to new goods and services eg apple
New product features e.g. extend product durability
warranties and after sales services
the way in which sold eg LV
Marketing approach, separates business from others
high quality materials
Patents
Relationships e.g. nike and LeBron
unique training
advantages of the differentiation strategy 4
Strong competitive advantage in markets with “brand loyalty”. •
Can charge premium pricing as the cost is not such an important consideration to consumers. •
Can work with large businesses who have money to create a brand image. •
Can work with small businesses who create a unique point of difference.
disadvantages of differentiation strategy (3
Is not good for “price sensitive” consumers / markets. •
The “unique features” can be copied / mimicked by other producers domestically or overseas which destroys your competitive advantage. •
Can be hard to protect your intellectual property, copyright, etc.
when deciding which strategy to implement, Porter states that
business should understand the competitive forces that make up their industry.
what are the 5 forces
supplier power
buyer power
competitive rivalry threat of substitution
threat of new entry
what is supplier buying power + what is this driven by 4
how easy it is for suppliers to drive up the price of the item they supply to a business. This is driven by:
number of suppliers of each essential input,
uniqueness of their product or service,
relative size and strength of the supplier,
cost of switching from one supplier to another
what is buyer power
Businesses need to consider how powerful their buyers or customers may be. They need to conduct an assessment of how easy it is for buyers to drive prices down.
what is competitive rivalry
number and capability of competitors in the market. If a business is operating in a market with many competitors, most of whom are offering undifferentiated products and services, then a business may find they have a reduced market attractiveness.
what is threat of substitution
how easy it is for customers to find a similar goof pr service like Coke and Pepsi are often considered close substitutes, as are banks with regards to interest rates on home loans.
what is threat of new entry
how easy it is for new competitors to enter the market
what is a SWOT analysis
A SWOT analysis involves the identification and analysis of the internal strengths and weaknesses of the business, and the opportunities in, and threats from, the external environment.
what is a competitive advantage
occurs when a rm, industry or economy has a lower cost price structure than its rivals. In this situation, goods and services can be sold more cheaply, undercutting competitors, and expanding domestic and foreign sales. The concept can also be extended to product quality range and flexibility in adapting to new trends in the market.
eg of societal attitudes
Migration • Workforce education increasing • Millennial workforce expectations, Aging workforce • Increased participation of women in the workforce • Changing family make up,
types of management skills 6
communication skills Delegation skills planning skills Leading skills Decision-making skills Interpersonal skills
how is communication good for change
Clear communication required in order progress change, as the changes will appear as clear for all staff to understand.
how i delegation skills good for change
Managers can oversee all aspects of the change, passing authority ensuring everyone is working toward goals
how is planning skills g for change
Plan is required to ensure that there are clear goals to achieve from the change
leading skills good for change
required to help influence staff to accept any change and thus work towards new objectives. the leadership determines how effectively the change is implemented and how quickly and successfully any resistance is overcome.
how is decision making skills g for change
During the change process decisions will need to be made putting the business in the best position changing the organisation in the most efficient and effective way possible.
how is interpersonal skills g for change
change may have a negative impact for employees and managers need to relate and empathise with employees and any other stakeholder impacted by the change.
management skills
Autocratic persuasive consultative participative Laissaiz - faire
what is the force field analysis
Psychologist Kurt Lewin developed a useful model for understanding the change process. Known as Force Field Analysis, the model describes how you can determine which forces drive and which resist a proposed change.
performance management strategies 5
employee observation performance appraisal management by objectives employee self evaluation performance feedback
on the job training
When employee needs to learn skill that usually occurs within working environment eg. Equipment, machinery + documents
off the job training
Training away from workplace
- Individuals sent to specialised training institutes (TAFE/uni)
- To gain qualifications = to assist with performance
types of performance related pay
Pay increase, bonuses, commissions, share plans, profit sharing
what is Porter’s lower cost strategy
Lower cost strategies involve a business seeking to become the business with the lowest costs in its industry. This will allow the business to become more pro table as it can increase its margin
what are the Three steps of Porter’s generic strategies
step 1 Carry out a SWOT analysis
Step 2 Porter’s 5 force analysis
step 3 compare the SWOT with the results of the 4 forces
what is step 1 in Porter’s generic strategy
Carry out a SWOT (Strengths, Weaknesses, Opportunities and Strengths) for each of the two strategies. businesses should consider undertaking a SWOT analysis in regular intervals to evaluate the impact of future change.
what is step 2 in Porter’s generic strategy
A business should use this as a tool to understand where power lies in a business situation. The tool can be used to identify weather new products, services or businesses have the potential to be profitable.
explain step three in Porter’s generic strategy
A Business should select the generic strategy that provides the strongest set of options
