Unit 4 AOS 1

Question 1

Business change

Answer 1

Business change is the alteration and adaption of behaviours, policies and practices of a business.

Question 2

Why may a business want to implement business change?

Answer 2

Businesses can choose to adapt and evolve in order to increase business performance in varying areas in order to achieve business objectives and goals

Question 3

Key Performance Indicators (KPI)

Answer 3

Key performance indicators (KPIs) are criteria that measure how efficient and effective a business is at achieving different objectives.

Question 4

Percentage of market share

Answer 4

Percentage of market share measures a business’s proportion of total sales in a specific industry, expressed as a percentage.

Equation: Total sales/Total industry sales=MS%

Question 5

What does the Percentage of market share indicate?

Answer 5

Percentage of market share highlights how well a business is performing within their industry. A high percentage of market share shows that the business has a large share of total industry sales relative to competitors. A low percentage of market share shows that the business has a small share of total industry sales.

Question 6

Net profit figures

Answer 6

Net profit figures are calculated by deducting total expenses incurred from total revenues earned over a period of time.

Equation: Total revenue - total expenses (or turnover) = Net profit ($)

Question 7

What does net profit figures indicate?

Answer 7

It can indicate the health of the business and the levels of profits being produced in order for future business growth. Too much expenses that are inhibiting profits can indicate negative health whereas high profits indicate a financially healthy business.

Question 8

Number of sales

Answer 8

Number of sales is the amount of goods and services sold by a business within a specific time period.

Equation: Number of sales

Question 9

Number of customer complaints

Answer 9

Number of customer complaints is the amount of customers who have notified
the business of their dissatisfaction.

Question 10

Why may a business implement KPI’s?

Answer 10

As all businesses seek to improve performance the implementation of KPI’s allows a business to review its performance from a set of data. This can then allow for a business to assess the performance levels of a business and identify if business change needs to occur to improve performance.

MENTION:

• -> identify performance levels
• -> See if business change needs to occur
• -> in order to effectively and efficiently improve the business

Question 11

Why may a buisness identify the percentage of market share?

Answer 11

Percentage of market share highlights how well a business is performing within their industry. Where the amount of sales within the industry identify the competitiveness of the business.

A high percentage of market share shows that the business has a large share total industry sales relative to competitors resulting in increased sales which can therefore meet business objective. A low percentage of market share shows that the business has a small share of total industry sales.

Question 12

Why may a buisness need to identify net profit figures?

Answer 12

In order for a buisness to grow and survive the business must examine net profit figures in order to identify revenue and expenses and which areas need improvement to increase profit margin and ensure business health.

Question 13

Why may a manager need to identify the number of sales?

Answer 13

A manager may examine the number of sales to assess how well the business’s goods and services are selling.

A high number of sales indicates that customers
are satisfied with the quality and price of the good or service the business is providing.

In contrast, a low number of sales may show that customers are becoming dissatisfied with the quality or price of goods or services, or competitors may be offering better goods or services.

Through the identifying the number of sales it can identify if a business needs to implement change in order to increase the number of sales.

Question 14

Why may a buisness need to identify the number of customer complaints?

Answer 14

A manager may examine the number of customer complaints at a business to
assess the level of customer satisfaction. A low level of customer complaints
indicates that customers are satisfied with the goods and services being
provided. In contrast, a high level of customer complaints indicates that
customers are not satisfied with the goods and services. Complaints may be in
regard to the quality or price of the goods and services a business offers.

Question 15

Rates of staff absenteeism

Answer 15

Rates of staff absenteeism is the average number of days employees are not present when scheduled to be at work, for a specific period of time. This can be calculated through number of absent staff days divided by number of staff

Question 16

Why may a manager examine rates of staff absenteeism?

Answer 16

A manager can use this as an indicator of staff morale where a high staff absenteeism can indicate less motivated and unsatisfied working conditions. This can result in additional expenses and halts in business operations due to lack of staff therefore a manager can then find methods and strategies to reduce staff absenteeism in order to improve the business.

Question 17

Staff morale

Answer 17

Staff morale is the collected attitudes, satisfaction and overall outlook that employees have of the workplace. Staff morale can influence a business’s productivity,
workplace safety, attendance and staff turnover.

Question 18

Level of staff turnover

Answer 18

Level of staff turnover is the percentage of employees that leave a business in a year and have to be replaced.

Equation: number of staff leaving in a year/total number of staff x100=%

Question 19

Why may a manager examine the levels of staff turnover?

Answer 19

A manager can assess the levels of staff turnover which can indicate levels of morale within a business. A business with low levels of staff turnover can display levels of satisfaction within the business, work conditions and management styles.

Likewise high levels of staff turnover can indicate employee dissatisfaction which can increase business expenses through replacing and recruiting new employees and reduce productivity through having insignificant employees within a business.

Question 20

Number of workplace incidences

Answer 20

Number of workplace accidents measures the amount of injuries and unsafe incidents that occur at a work location over a period of time.

Question 21

Why may a manager examine the number of workplace incidences?

Answer 21

A human resources manager is concerned with the number of workplace accidents occurring at a business since it is their responsibility to ensure the
safety and well being of employees.

A high number of workplace accidents reflects an unsafe workplace. This can affect staff morale and increase the rates of staff absenteeism and level of staff turnover. A high number of workplace accidents also makes the business undesirable for prospective employees.

Question 22

Levels of wastage

Answer 22

Level of wastage is the amount of inputs and outputs that are discarded during the production process.

Question 23

Why may a manager examine the levels of wastage?

Answer 23

An operations manager would be concerned with a high level of waste at any stage of the production process. High levels of wastage often increases the
amount of raw materials or time required to produce a product or service. This waste then increases the expenses of the business which reduces the
profit of the business.

Question 24

Rate of productivity growth

Answer 24

Rate of productivity growth is the increase in outputs produced from a given level of inputs over time.

Question 25

Why may a manager examine the rates of productivity growth?

Answer 25

A manager may examine rates of productivity. A high rate of productivity growth shows that a business has improved its efficiency. A business that can produce more for the same level of inputs is more efficient and therefore also more profitable.

In contrast, a lower
level of productivity would mean slower rate of growth for the business.

Question 26

Force field anaylasis

Answer 26

Force field analysis theory is a model developed by Kurt Lewin that determines if businesses should proceed with a proposed change.

This model identifies and examines factors which promote or hinder the change from being successful through identifying factors that will influence change.

Question 27

What are the two key principles of Lewins Force Field analysis?

Answer 27

Driving forces are factors within or outside the business’s environment which promote change.

Restraining forces are factors within or outside the business’s environment which
resist change.

These principles act as main factors which influence business change and establish the basis of Lewin’s force field analysis theory.

Question 28

Lewin’s force field analysis process. Step one

Answer 28

Identify need for change. Businesses face internal or external pressures to change.

Question 29

Lewin’s force field analysis process. Step two

Answer 29

Identify driving forces. Which internal and external factors promote the proposed change

Question 30

Lewin’s force field analysis process. Step three

Answer 30

Identify restraining forces. Which factors resist the proposed change

Question 31

Lewin’s force field analysis process. Step four

Answer 31

Assign scores. Determine the strength of each driving and restraining force by assigning numerical scores
that are based on their level of influence on the proposed change.

Question 32

Advantages and disadvantages - Force field analysis: Buisness

Answer 32

Advantages:
• Businesses can examine if a proposed
change will be successful.

Disadvantages:

Question 33

Advantages and disadvantages - Force field analysis: Employee

Answer 33

Advantages:

Disadvantages:
• Employees may be unhappy if driving
forces exceed restraining forces and
change still occurs.

Question 34

Advantages and disadvantages - Force field analysis: Money

Answer 34

Advantages:
• Businesses can potentially save money by
only implementing change where success
is likely.

Disadvantages:

Question 35

Advantages and disadvantages - Force field analysis: Time

Answer 35

Advantages:
• Businesses can potentially save time by
promoting the main driving forces and
limiting the main restraining forces.

Disadvantages:
• Can be time-consuming, especially if a
business must go ahead with a change. For
example, a change is required for legislation

Question 36

Lewin’s force field analysis process. Step five

Answer 36

Analyse situation and apply

Question 37

KPI’s Financial and non financial

Answer 37

Financial: Increased sales profit margin and return on sales

Non financial: staff turnover, customer satisfaction, number of items produced and sold.

Question 38

What may the number of sales indicate?

Answer 38

The number of sales can identify the amount of sales of products or services within a year at a business which the growth of a business growing per annum.

Specifically the number of sales can also identify the products of services of a business which are most popular to least popular in sales, This can then also identify if business change is needed in order to increase sales.

Question 39

Internal driving forces for business change: Managers

Answer 39

Managers have a vested interest in the performance of a business.

This is because business performance impacts their financial and job security. Managers will act as an internal driving force as they are incentivised to push for change that will help the business better fulfil its objectives.

Therefore a manager will be inclined to push for business change that increase business performance for personal financial benefits and job security.

Question 40

Driving forces

Answer 40

Driving forces are the factors within or outside the business environment which promote change.

Question 41

Internal driving forces for business change: Employees

Answer 41

Employees help achieve business objectives by completing work tasks to meet the needs of the business. In return for their contribution to the business, employees have their own expectations such as wages and suitable working conditions.

Therefore any business change that affects the employees and act as a driving force.

Question 42

Internal driving forces for business change: Pursuit of profit

Answer 42

Making a profit is a business objective therefore opportunities to improve financial performance will often encourage a business to implement business change. Additionally, this will make a business fulfil its obligations, such as providing a return to shareholders. Therefore acting as an internal driving force for business change

Question 43

Internal driving forces for business change: Reduction of cost

Answer 43

Businesses always seek to be as efficient and effective as possible. Strategies that reduce wastage or improve productivity can reduce a business’s costs and
improve its profitability as often this will lead to an increase in a business’s net profit
margin. A business may be able to source materials from a cheaper supplier or move their
locations to benefit from cheaper rent as a means of reducing costs and improving profits. REDO**

Question 44

Internal environment

Answer 44

internal environment is the specific factors within a business which impact its performance.

Question 45

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Answer 45

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Question 46

External driving forces for business change: Competitors

Answer 46

Competitors are other company within the same industry/market which when accumulated make up the total market share. This therefore creates a competitive environment where the most driven businesses will implement change in order to maintain or increase market share.

Question 47

External driving forces for business change: Technology

Answer 47

Technology is always changing and developing. Therefore as new technological developments occur that can increase the effectiveness and efficiency of a business production it will act as a driving force in order for a business to improve operations and productivity.

Question 48

External driving forces for business change: Societal attitudes

Answer 48

In order for a business to be successful they must abide by societal views. Therefore a business must adapt to current societal views and align business operations as such in order to maintain and achieve business objectives. This involves popular trends such as health fads, new views such as environmentalist.

Question 49

External driving forces for business change: Legislation

Answer 49

All businesses are required to comply with laws and regulations to avoid fines, suspensions or even closure. A business may be forced to change if new legislation is introduced. If current operations breach the new legislation, a business will have no choice but to change the way they operate. Businesses will always need to comply with legislation, making it a constant driving force for change.

Question 50

External driving forces for business change: Innovation

Answer 50

Innovation acts a constant pressure for all businesses, this is due to the pressure of achieving and improving business objectives. Which then causes for the push of looking for new methods and procedures to improve the function of the business and products and good that are sold to customer.

Question 51

External driving forces for business change: Globalisation

Answer 51

The trend of globalisation means that more businesses are operating on a global scale due to trade barriers being removed. Businesses are now operating in a single global market, which means that all businesses face the pressure of international competition. Increased international competition means that businesses need to find more efficient ways to operate.

Question 52

Restraining forces

Answer 52

Restraining forces are internal and external factors that resist a business change or actively try to stop it. This can directly effect if business change will be successful.

Question 53

Restraining forces that inhibit business change: Managers

Answer 53

Managers can act as a restraining force against business change as they may feel threatened if there job position being affected and may feel they will attract unwanted/additional stress which will decline any pursue in business change.

Question 54

Restraining forces that inhibit business change: Employees

Answer 54

Employees may resist a business change if the outcome is uncertain such as affecting their job security or possible negative change to there working conditions. this can then possibly result in employees may even actively opposing changes by carrying out industrial action.

To overcome employees as a restraining force, managers often have to persuade or create incentives for the proposed changes to be adopted.

Question 55

Restraining forces that inhibit business change: Legislation

Answer 55

Businesses need to comply with laws and regulations to avoid fines, suspensions or even closure.
Therefore, a business must consider the types of legislation that apply to any proposed business change.

To overcome a legislative restraining force, a business may have to apply for licenses, obtain permits or even change contracts and agreements.

Question 56

Restraining forces that inhibit business change: Time

Answer 56

Business changes often have to be completed before, after or within a certain time
period. The time restrictions may be due to other restraining forces such as legislation
deadlines or financial pressures. If time has been identified as a restraining force, a
business may have to find ways to alter the time restriction.

Question 57

Restraining forces that inhibit business change: Financial consideration

Answer 57

Most business changes will incur a cost for it to be introduced or implemented. A business must ensure that it has enough funds to carry out the proposed change. If the business cannot finance the change, it will need to explore different ways of obtaining the required funds

Question 58

Restraining forces that inhibit business change:

Organisational inertia

Answer 58

A business may have been operating in a certain way for such a long time that it can
become difficult for change to occur. When a business matures and grows in size,
processes and procedures often have to be made consistent to promote efficiency in
operations. As staff become familiar and comfortable with these structures, attempts to
make changes can be difficult. To overcome organisational inertia, a business may have
to change leadership, restructure the business or create work environments that promote new directions.

Question 59

Organisational inertia

Answer 59

Organisational inertia is the tendency for a business to

maintain established ways of operating

Question 60

Porters Generic strategies

Answer 60

Porter’s generic strategies describe how a company pursues competitive advantage by using two key approaches which are porters low cost strategy and porters differentiation strategy.

Question 61

Porter’s lower cost strategy (Cost leadership)

Answer 61

Lower cost strategy is 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.

Question 62

Ways of reducing the cost of supplies

Answer 62

• 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.

Question 63

Ways of reducing internal operating costs

Answer 63

• 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 such as solar.

Question 64

 The advantages and disadvantages of Porter’s lower cost strategy: Buisness

Answer 64

Advantages:
• 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.

Disadvantages:
• 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.

Question 65

 The advantages and disadvantages of Porter’s lower cost strategy: Employee

Answer 65

Advantages:

Disadvantages:
• Fewer employees required as work tasks and roles may be merged. This may result in increased work stress due to multiple responsibilities.

Question 66

 The advantages and disadvantages of Porter’s lower cost strategy: Time

Answer 66

Advantages:
• Business operations are optimised and
must remain efficient and effective to
maintain lower costs of production.

Disadvantages:

Question 67

 The advantages and disadvantages of Porter’s lower cost strategy: Money

Answer 67

Advantages:
• Reduces the expense of operations.

Disadvantages:
• 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

Question 68

Porter’s differentiation strategy

Answer 68

The differentiation strategy aims to acheive a competative advantage by offering customers unique services or product features that are of perceived value to customers which can then be sold at a higher price than competitors.

This strategy is suitable for markets that supply customers with a non price sensitive good or service or a customer needs are currently not being met.

Question 69

How can a business implement Porters differentiation strategy?

Answer 69

• introducing new technology
• implementing innovations
• improving durability where the product lasts longer because of higher quality materials or design.
• niche marketing by meeting the customer needs of a specific market

Question 70

Similarities of Porters Low cost and Differentiation strategy

Answer 70

Increases a business’s profitability by providing a competitive advantage.

However, Porter emphasises that a business should only choose one strategy. This is because pursuing lower costs contradicts the increased costs needed to differentiate

Question 71

Differences of Porters Low cost and Differentiation strategy

Answer 71

Lower cost:
• Sells at similar or lower prices.
• Targets cost-conscious customers.
• Internal focus on operating processes

Whereas

Differentiation:
• Sells at premium prices.
• Targets customers that are not price-sensitive.
• External focus on meeting customer needs

Question 72

The advantages and disadvantages of Porter’s lower differentiation strategy: Buisness

Answer 72

Advantages:
• Customers are often loyal to the business brand because of unique features or services not offered by competitors

Disadvantages:
• Can be difficult to prevent competitors from replicating point of differentiation.

Question 73

The advantages and disadvantages of Porter’s lower differentiation strategy: Employee

Answer 73

Advantages:
• Employees may feel an increased sense of pride working for a differentiated business. This can motivate employees to be more productive and effective

Disadvantages:
• New employees may require additional training to adapt their skills to match the business’s point of difference.

Question 74

The advantages and disadvantages of Porter’s lower differentiation strategy: Time

Answer 74

Advantages:
• Quicker sales from loyal customers when new products or services from the business are introduced.

Disadvantages:
• Higher investments of time and money such as research to develop innovative products or improve service levels of employees

Question 75

The advantages and disadvantages of Porter’s differentiation strategy: Money

Answer 75

Advantages:
• Can charge premium prices for products or services as customers cannot purchase the product or service elsewhere.

Disadvantages:
• Higher selling prices can deter some customers

Question 76

What are the driving forces of a business to implement change? (10)

Answer 76

• Competitors
• societal attitudes
• innovation
• technology
• pursuit of profit
• reduction of costs
• legislation
• Managers
• Employees
• Globalisation

Question 77

What are the restraining forces of a business to implement change? (6)

Answer 77

• financial considerations
• managers
• employees
• organisational inertia
• legislation
• Time