UNIT 4 AOS 1 Flashcards
The key concept of business change
Business change is the adoption of a new idea or behavior
It’s a result of pressures in the business environment
Effectiveness
Is the ability of a business to achieve its stated goals
Why do businesses need to evaluate performance?
It helps them understand how they are performing against their stated objectives
KPI ( Key performance indicators )
A KPI is defined as a measure or set of data that allows a business to determine whether its meeting its business objectives.
A KPI or data source must be (if not it will not be efficient) (5)
Relevant Valid Reliable Deliver valuable information Comparative - compare with previous data
Areas of consideration include for KPIS… (know all of them) (9)
Percentage of market share Net profit figures Number of sales Rate of productivity growth Rates of staff absenteeism Level of staff turnover Level of wastage Customer complaints Number of workplace accidents
Percentage of market share
Percentage of sales or business that one company has compared with its competitors in the same market
If a company’s market share increases, the business has a greater percentage
of the market/ sales
Net Profit Figures
The amount of income left when expenses are deducted from a business revenue Money in (revenue) - expenses out = profit
Rate of productivity growth
This is a measure of the increases in the amount of outputs given the amount of inputs for a certain period of time
The rate of change (increase or decrease) gives an indication of the rate of growth
Number of sales
The total quantity of sales of a particular product or service
Helps a business understand if they are achieving sales forecasts
Sales trends help with the establishment of budgets, forecast revenue and plan production
Rate of staff absenteeism
This measures the number of times a staff member is not at work, who is using sick and personal leave and who is not at work.
total time lost due to unscheduled absences/total time available for productions x 100
Staff turnover
Measures the number of employees that leave a business in a given period
If staff turnover is high there may be an underlying problem in the workplace which needs to be identified
Ways a business can reduce staff turnover (3)
Choosing good managers with excellent interpersonal skills
Provide employees with clear expectations, goals, vision, an understanding of expected behavior and work requirements
Provide support for employees when required
Level of wastage
The amount of wastage a business has in the production process gives an indication of efficiency , it also provides a measure of resources ( inputs ) that have not been converted into outputs
Number of customer complaints
Is an indicator of how your customers feel about your business and the quality
of the product/ service they have received
Number of workplace accidents
The rate and number of workplace accidents can show how a business values
an employees safety
Benefits of decreasing the number of accidents
Reduction in the number of disruptions to work and production
Reduction in lost production
Reduction in management reporting time of the accident
Force Field Analysis
In any situation it is the ‘way it is, because counterbalancing forces are keeping it that way’
He identified two types of forces - driving or restraining
When restraining forces are stronger it stops the change
Driving forces
Pushing the change to happen
Restraining Force
The forces that restrain or decrease the driving forces
Benefits of Force Field Analysis
Managers are able to identify and analyse the forces for and against the change
It can help decide if the change is worth pursuing
It allows managers to develop a way of reducing the resisting force
Factors that need to be present for change to be successful (need to know all 3)
If driving forces are more dominant in the business the change is likely to be successful
If driving and restraining forces are at a similar level it is likely that the change won’t be successful
If the restraining forces are more powerful than the driving forces , it is unlikely the change will be introduced
Mangers as driving forces for change
Managers are key drivers of change, they are the catalyst for change
Managers have two function
They provide the strategic direction for change
They are involved in a ‘hands on’ role - this is the responsibility for implementing that actual change in the business
Employees as driving forces for change
If employees support the business change it is likely the change will be successful
If a few key staff members support the change is it likely they can convince others to support it
Competitors as driving forces for change
Competition between companies ensures that business are always aware of what their competitors are doing and they can respond to change quickly
This is to ensure they don’t lose customers or reduce market share
Legislation as driving forces for change
There are three levels of government in Australia - federal, state and local
All levels of government can impact businesses and the level of change Federal law
focuses on laws that relate to employment, equal opportunity, anti discrimination and privacy laws
State law focuses on payroll tax
Local council focuses on permits, licence, parking restrictions, by law
Pursuit of profit as driving forces for change
Profits can drive businesses to introduce change
Profit needs to be sustained over time to make sure businesses can grow
One company may cut back on expenses and costs
Another may look at launching a new range of products and services
Reduction in costs (4) as driving forces for change
Businesses can reduce costs in a variety of areas…
Purchasing → global outsourcing
Production → automations/ waste minimisation
Sales → look at the discount we giving to customers
Finance → icloud, staff number
Globalisation as driving forces for change
Gives greater access to markets around the world
Gives customers the opportunity to better goods and services
Provides opportunities for faster business growth
Technology as driving forces for change
Technology impacts all types of businesses
Innovation as a driving force for change
Innovation is the introduction of new things and methods in a business.m eg technology
changes in societies attitudes as a driving force for change
Changes in society attitudes including changes in opinion, values and lifestyle
Its impacted by a changing demographic, age of the workforce, more women in the workforce, more women than men at university, migration trends, family makeup
Managers as a restraining force for change
Managers may refuse to implement change or passively resist it which makes change more difficult to implement in the workplace
Reasons why managers resist change
They may be afraid
They may not have the skills or experience
It may threaten their current role
Employees as a restraining force for change
They are scared to learn new skills or move into new territory
Change is difficult and they may not be emotionally equipped to deal with changes
Time as a restraining force for change
Business may find that a lack of time can impact the business and may stop it from making a change
Organizational inertia
The lack of ability for a business to react to internal and external pressures for change
Two elements to organizational inertia
Resource rigidity
Limited / don’t want to invest - relates to motivation to respond
Routine rigidity
- Inability to change the pattern and logic that underlines this - relates to the structure of response
Legislation as a restraining force for change
If a business can’t manage the changes required due to legislation it can cause major problems in the running of the organization
Financial considerations restraining force for change
Lack of finances can impact businesses especially small ones as the offer considerations that businesses need to consider
The cost of money (interest) and the cost of making changes are real considerations that businesses need to consider
Porter’s three steps
Carry out a SWOT analysis
Use Porter’s Five Forces analysis
Compare the results of the SWOT analysis with the five force analysis
Step one - SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Step 2 - Porters 5 force analysis (5)
supplier power buyer power competitve rivalry threat to substitution Threat of new entry
Supplier power
a business should assess how easy it is for suppliers to drive up prices
The more a business needs help from suppliers the more power a supplier has.
Buyer power
this looks at how easy it is for buyers to drive down prices.
If there are a few powerful buyers, then the power lies with them not the business.
Competitive rivalry
this area focuses on the number and capability of competitors.
If the product is unique then the business has a great deal of power.
Threat of substitution
this is affected by the ability of customers to find a product or service similar to the one provided by the business.
If substitution is easy then power and influence is reduced.
Threat of new entry
a business’ influence and power is affected by the ability of other businesses entering the same market and competing.
If there are few products and little protection of ideas it’s easier for new competitors to quickly enter the market and take away customers.
Step 3 - compare the SWOT and Porter’s analysis
Once you understand the competitive forces that you compete in… You can identify your competitive advantage
Two types of competitive advantage
Cost advantage
Differentiation advantage
Cost Leadership Strategy
Competitive advantage is gained by decreasing or altering costs of the business
Focus: low cost production, developing better economies of scale, investing in new technology, pressing supplier for better products
Two ways to implement a cost leadership strategy
Increase profit by reducing costs or charging lower prices
Advantages and disadvantages of a cost leadership strategy
Advantages
Increased market share
Increased profit
Increased productivity
Disadvantages
Low customer loyalty
May cause changes in reputation
Differentiation may include (6)
Durability Use Support After sales service Brand image It provides a connection to the brand
What to include when you plan to implement a differentiation strategy
Develop an effective marketing and promotional plan
Deliver a high quality product
Have a focus on R and D and innovation
When to use a differentiation strategy (3)
When the segment / target market is not price sensitive
The market is competitive
Customers have specific needs
Business has the resources, capabilities to satisfy customer needs, intellectual property needs and employee needs
Porter’s generic strategies in terms of strategic management
Porter believes you must be one or the other
