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unit 3/4 business management > unit 4 aos 1 > Flashcards

unit 4 aos 1 Flashcards

1
Q

what is business change?

A

the alteration of the behaviours, policies, and practises of a business
it can have both positive and negative consequences
e.g. the introduction of computer aided manufacturing, switching to overseas suppliers, moving employees from an award to an agreement etc.

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2
Q

what are key performance indicators?

A

criteria that measure how efficient and effective a business is at achieving different objectives
(if performance is unsatisfactory, change may be implemented and KPI’s can be used to evaluate the success of the change)

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3
Q

list the key performance indicators for business change

A
  • percentage of market share
  • net profit figures
  • number of sales
  • number of customer complaints
  • level of wastage
  • number of workplace accidents
  • rate of productivity growth
  • rate of staff absenteeism
  • level of staff turnover
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4
Q

what is percentage of market share as a KPI?

A

measures a business’ proportion of total sales in a specific industry as a percentage

a higher percentage shows a business has a large share of total industry sales relative to competitors while a low percentage shows a smaller share of total industry sales

calculated by: (business’ total sales / total sales in the industry) x 100

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5
Q

what is net profit figures as a KPI?

A

the business’ total expenses incurred deduced from it’s total revenues earned over a period of time

a high net profit figure indicates a business is performing well financially

calculated by: total revenue - total expenses

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6
Q

what is number of sales as a KPI?

A

the amount of goods and services sold by a business within a specific period of time

a higher number indicates that customers are satisfied with the quality and price of the business’ goods or services

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7
Q

what is number of customer complaints as a KPI?

A

the amount of customers who have notified the business of their dissatisfaction

a low level of complaints indicates a high level of customer satisfaction and business performance

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8
Q

list the human resource management key performance indicators

A
  • rates of staff absenteeism
  • level of staff turnover
  • number of workplace accidents
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9
Q

what are the operations management key performance indicators?

A
  • number of workplace accidents
  • level of wastage
  • rate of productivity growth
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10
Q

what is rates of staff absenteeism as a HR KPI?

A

the average number of days employees are not present when scheduled to be at work for a specific period of time

low rates indicate that staff are highly motivated, which improves productivity

calculated by: total no. of days staff are absent for / total no. of staff

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11
Q

what is level of staff turnover as a HR KPI?

A

the percentage of employees that leave a business in a year and have to be replaced
(redundant employees do not count!)

a high level indicates that staff are dissatisfied and unmotivated

calculated by: total no. of staff leaving in a year / total no. of staff required

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12
Q

what is the number of workplace accidents as a HR / operations KPI?

A

measures the amount of injuries and unsafe incidents that occur at a work location over a period of time
(can occur because of faulty equipment, poorly trained employees, dangerous nature of tasks etc.)

a high number can impact can impact staff absenteeism and staff turnover, and therefore productivity

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13
Q

what is level of wastage as an operations KPI?

A

the amount of inputs and outputs that are discarded during the production process

high levels often increase the amount of raw materials required to produce goods / services, which can increase expenses and reduce profit

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14
Q

what is rate of productivity growth as an operations KPI?

A

the increase in outputs produced from a given level of inputs overtime

a high rate shows a business has improved on it’s efficiency from previous years and is also more profitable

calculated by: ((new productivity rate - old productivity rate) / old productivity rate) x 100

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15
Q

what is the force field analysis theory?

A

a model that determines if a business should proceed with a proposed change
it identifies and examines factors which promote or hinder the change from being successful

it has two key principles:
driving forces and restraining forces

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16
Q

outline the steps of the force field analysis theory

A

1 - identify the need for change (what must be altered to fulfil business objectives?)
2 - identify driving forces (which factors promote the proposed change?)
3 - identify restraining forces (which factors resist the proposed change?)
4 - assign scores (numerical values of the strength of each driving and restraining force based on their level of influence on the proposed change)
5 - analyse and apply (add up the scores, if the driving forces score higher than the restraining forces then change will likely be successful, if not the strategies to overcome restraining forces should be taken)

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17
Q

list the advantages of the force field analysis theory

A
  • businesses can examine if a proposed change will be successful
  • businesses can potentially save time by promoting the main driving forces and limiting the main restraining forces
  • businesses can potentially save money by only implementing change where success is likely
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18
Q

list the disadvantages of the force field analysis theory

A
  • employees may be unhappy if driving forces exceed restraining forces and change still occurs
  • can be time consuming especially if a business must go ahead with a change (e.g. a change is required for legislation)
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19
Q

define internal driving forces and list them

A

forces which the business has control over and are relevant to the internal environment

  • managers
  • employees
  • pursuit of profit
  • reduction of costs
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20
Q

how are managers an internal driving force for business change?

A

they are incentived to push for change that will help the business better fulfil it’s objectives, as this can impact their financial and job security

21
Q

how are employees an internal driving force for business change?

A

they complete work tasks to fulfil business objectives and in return have expectations like competitive wages, supportive working conditions, and training, so will be a driving force for changes which may improve these things

22
Q

how is pursuit of profit a driving force for business change?

A

opportunities to improve financial performance will encourage a business to change, as making profit is a main objective of most, if not all, businesses

23
Q

how is reduction of costs a driving force for business change?

A

strategies that reduce waste and improve productivity, or reduce costs and improve profits, can increase efficiency which a business strives to achieve

24
Q

define external driving forces and list them

A

factors that exist outside of a business that must be responded to in order to remain competitive

  • competitors
  • technology
  • societal attitudes
  • legislation
  • innovation
  • globalisation
25
Q

how are competitors a driving force for business change?

A

they change prices, use new technology, run competitive advertising campaigns etc which can affect the performance of other businesses in the same market, so businesses must always adapt to remain competitive

26
Q

how is technology a driving force for business change?

A

it can increase the efficiency of a business’ operations and improve productivity which a business strives for, but is constantly developing meaning businesses must keep up

27
Q

how are societal attitudes a driving force for business change?

A

the are constantly evolving which means businesses have to keep changing to meet expectations to maintain customer satisfaction

28
Q

how is legislation a driving force for business change?

A

businesses are required to comply with changes to laws and regulations to avoid fines, suspension, or even closure

29
Q

how is innovation a driving force for business change?

A

continuously improving or introducing new goods or services helps a business remain competitive and maintain sales and market share

30
Q

how is globalisation a driving force for business change?

A

it means more businesses are operating in a single global market and face pressure from international competitors, causing them to need to find more efficient ways of operating to increase their competitiveness

31
Q

define restraining forces and list them

A

factors within or outside of the business’ environment which resist change

  • managers
  • employees
  • legislation
  • time
  • financial considerations
  • organisational inertia
32
Q

how are managers a restraining force for business change?

A

they may be unwilling to introduce a business change if they personally do not support it or if it threatens their position

33
Q

how are employees a restraining force for business change?

how can this be overcome?

A

they may resist change if the outcome is uncertain, it affects their job security, or they don’t see a reason

they can actively oppose changes by carrying out industrial actions

managers can overcome this by persuading employees or creating incentives for the change to be adopted

34
Q

how is legislation a restraining force for business change?

how can this be overcome?

A

businesses need to comply with laws and regulations when implementing changes to avoid fines, suspension, or even closure

to overcome this businesses may need to apply for licences, obtain permits, or change contracts and agreements

examples of legislation can include:

  • competition and consumer act (competitors)
  • pricing displays, warranties and refunds (customers)
  • pay and conditions, OHS, unfair dismissal (employees)
  • environmental licenses and permits (environment)
  • contracts, importing and exporting laws (suppliers)
35
Q

how is time a restraining force for business change?

how can this be overcome?

A

changes often have to be completed before, after, or within a specific time period

to overcome this, businesses may have to find ways to alter the time restriction like progressively implementing the change in stages or having another business assist with the change

36
Q

how are financial considerations a restraining force for business change?
how can this be overcome?

A

most changes will incur costs to be introduced and a business must ensure it has enough funds

if a business does not have enough funds, it can overcome this by exploring ways of obtaining funds or altering the change to fit financial restrictions

37
Q

how is organisational inertia a restraining force for business change?
how can this be overcome?

A

(it is the tendency for a business to maintain established ways of operating)
it can make it difficult for change to occur as processes and procedures have been made consistent and employees are comfortable and familiar with them

to overcome this, a business may change leadership, restructure the business or create new work environments that promote new directions

38
Q

what are porter’s generic strategies?

A

porter proposed that businesses in any industry can gain a competitive advantage by adopting the generic strategies of either: -

  • lower cost
  • differentiation
39
Q

outline porter’s generic lower cost strategy

A

a business offering customers similar or lower priced products compared to the industry average while remaining profitable by achieving the lowest cost of operations among competitors

it is viable in industries where there are a large number of cost conscious customers

porter argues that only one business in a industry should be aiming to use this strategy, as if more than one business is competing for the lowest cost of operations, rivalry can cause the entire industry’s profitability to decrease

40
Q

what are the three pricing approaches to gain competitive advantage after achieving the lowest cost of operations in porter’s generic lower cost strategy?

A

1 - charge similar prices to competitors (gain higher profit margins than competitors due to a lower cost of operations)
2 - charge slightly lower prices than competitors (maintain a higher profit margin by keeping the price decrease smaller than cost advantages)
3 - charge much lower prices than competitors (profit margins are outweighed by a high volume of customer sales gain from significantly lower prices)

41
Q

what are the two ways that a business can achieve the lowest cost of operations in porter’s generic lower cost strategy?

A

1 - reducing internal operating costs

(e. g. - producing basic, no frills products or services
- reducing expenditure on marketing and advertising
- lowering the costs of labour and operations through overseas manufacturing
- producing a high volume of output through automated production lines
- reducing operating costs through economies of scale
- lowering long term energy costs by using renewable energies like solar power)

2 - reducing the cost of supplies

(e. g. - obtaining discounts by purchasing supplies in bulk
- securing cheaper supplies from global sourcing of inputs
- maintaining low inventory supplies by using just in time
- lowering long term costs by sourcing sustainable supplies)

42
Q

list the advantages of porter’s generic lower cost strategy

A
  • attractive to cost-conscious customers
  • creates a barrier to entry for new competitors as it is often challenging for them to match lower prices, reduced costs of operations and still remain profitable
  • business operations are optimised and must remain efficient and effective to maintain lower costs of production
  • reduces the expenses of operations
43
Q

list the disadvantages of porter’s generic lower cost strategy

A
  • standardised or basic products may not meet the needs of customers who have specific needs
  • customers are not brand loyal, if another business were to offer a cheaper alternative, these customers would likely switch to the new business immediately
  • low prices may result in customer perceptions that the product or service is of lower quality. only viable for larger businesses with high market shares
  • reduced spending on research and development or market research means that the business may be late to detect new trends in the market
  • fewer employees required as work tasks and roles may be merged, which may result in increased work stress due to multiple responsibilities
  • thin profit margins and reliance on low operating costs can leave a business vulnerable to unforeseen increases in expenses such as suppliers raising their prices
44
Q

outline porter’s differentiation strategy

A

a strategy which offers customers unique services or product features that are of perceived value to customers which can then be sold at a higher price than competitors

it is suitable for markets where customers are not price sensitive and specific customer needs are currently either unmet or underserved. also markets that are highly competitive as a business needs to stand out

the business should have unique resources or capabilities that are difficult for competitors to copy

45
Q

how can a business create a point of differentiation in porter’s differentiation strategy?

A
  • introducing new technology such as electric cars or wireless charging for smartphones
  • implementing innovations such as new flavours for chocolates or soft drinks
  • improving durability where the product lasts longer because of higher quality materials or design.
  • advertising a brand image that portrays a status or image aligned with the customer’s personal values
  • niche marketing by meeting the customer needs of a specific market segment such as fashion for larger men
46
Q

list the advantages of porter’s differentiation strategy

A
  • customers are often loyal to the business brand because of unique features or services not offered by competitors
  • employees may feel an increased sense of pride working for a differentiated business which can motivate employees to be more productive and effective
  • quicker sales from loyal customers when new products or services from the business are introduced
  • can charge premium prices for products or services as customers cannot purchase the product or service elsewhere
47
Q

list the disadvantages of porter’s differentiation strategy

A
  • can be difficult to prevent competitors from replicating point of differentiation
  • new employees may require additional training to adapt their skills to match the business’s point of difference
  • higher investments of time and money such as research to develop innovative products or improve service levels of employees
  • higher selling prices can deter some customers.
48
Q

list the similarities and differences between porter’s generic lower cost strategy and porter’s differentiation strategy

A

SIMILARITIES
- both increase a business’ profitability by providing a competitive advantage

DIFFERENCES

  • lower cost sells at similar or lower prices, differentiation sells at premium prices
  • lower cost targets cost conscious customers, differentiation targets customers that are not price sensitive
  • lower cost has an internal focus on operating processes, differentiation has an external focus on meeting customer needs

unit 3/4 business management (7 decks)

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