UNIT 4 AOS1 - SAC 1

Question 1

Explain reviewing performance.

Answer 1

• Businesses will review their performance to determine their success.
• Reviews help leaders understand the progress the business has made towards objectives.
• Reviews should include financial analysis but also other aspects such as employee satisfaction, market reputation, innovation, efficiency and adaptability.
• These reviews can be a catalyst for change.

Question 2

Explain business change.

Answer 2

Business change is the process of making alterations by adopting a new idea or behaviour.

• Changes are vital to a business to help them gain or retain a competitive advantage.
• Managing change is often a complex task that involves addressing resistance to the change, communicating clearly, and ensuring it is integrated into the existing business model.

Changes can be:
Minor - such as tweaking a marketing strategy.
Major - such as restructuring the entire business (also knows as transformational).

Question 3

Explain proactive change.

Answer 3

A proactive approach to change involves anticipating changes in the dynamic business environments and taking actions in advance to take advantage.

• Helps the business stay ahead of competitors.
• Allows the business to be in more control rather than reacting all of the time.

Question 4

Explain managing proactive change.

Answer 4

• Conducting Regular Market Research: By staying informed about trends and changes in the market.
• Encouraging innovation: Encouraging employees to come up with new ideas can lead to improvements in products, services, or processes.
• Strategic Planning: Businesses should have long-term strategic plans that consider potential future changes.
• Identifying potential issues early: Monitoring KPIs and implementing changes before there is a larger concern.

Question 5

Explain a reactive change.

Answer 5

A reactive approach to change is where the business is impacted by pressures from the business environments and then responds as a result.

• Leaders may be under time pressure to implement changes.
• While it isn’t ideal to be reactive, sometimes it’s necessary.

Question 6

Explain managing reactive change.

Answer 6

• Crisis management: Being faced with a crisis and implementing strategies to overcome the issues the business is faced with.
• Being flexible: Leaders must be ready to shift strategies, reallocate resources, or modify products or services in response to changes.
• Reacting to competitors: A competitor may implement a strategy that impacts the business and the leaders need to implement change in response.

Question 7

Explain key performance indicators (KPI).

Answer 7

Key performance indicators: are the criteria used to measure the success of a business’s ability to achieve business objectives.
- Businesses can measure their performance through Key Performance Indicators (KPIs).
- Analysing KPI data helps managers make informed decisions.

KPIs measure the effectiveness and efficiency:
- Effectiveness: the ability of a business to achieve objectives.
- Efficiency: how well a business uses its resources.

Question 8

List the key performance indicators (KPI).

Answer 8

1. Percentage of market share
2. Net profit
3. Rate of productivity growth
4. Number of sales
5. Rates of staff absenteeism
6. Level of staff turnover
7. Level of wastage
8. Number of customer complaints
9. Number of website hits
10. Number of workplace accidents

Question 9

Define percentage of market share.

Answer 9

The proportion of sales a business has compared to the total sales in the market expressed as a percentage.

Question 10

Define net profit.

Answer 10

Net profit: the amount of money left over after all expenses have been deducted from the revenue earned.

Question 11

Define rate of productivity growth.

Answer 11

Rate of productivity growth: the amount of outputs produced compared to the amount of inputs used and the rate at which it increases over time.

Question 12

Define number of sales.

Answer 12

Number of sales: the amount of goods or services sold in a specified period of time.

Question 13

Define rates of staff absenteeism.

Answer 13

Rates of staff absenteeism: the number of employees that do not turn up to work when expected to be there.

Question 14

Define level of staff turnover.

Answer 14

Level of staff turnover: the rate in which people leave the business and need to be replaced.

Question 15

Define level of wastage.

Answer 15

Level of wastage: the amount of resources and finished goods that are underutilised or discarded during the production process.

Question 16

Define number of customer complaints.

Answer 16

Number of customer complaints: the amount of people that are dissatisfied with the business and/or its products and have notified the business of their dissatisfaction.

Question 17

Define number of website hits.

Answer 17

Number of website hits: measures the amount of times individuals visit a business’ website.

Question 18

Define number of workplace accidents.

Answer 18

Number of workplace accidents: is the amount of unplanned or uncontrolled events that result in personal injury or property damage at a business.

Question 19

Explain force field analysis.

Answer 19

• Kurt Lewin developed a model that helped managers understand the factors that worked in support of a change and those that worked against the change.
• For change to be successful, the strength of the driving forces should outweigh the strength of the restraining forces.

These factors are called driving forces and restraining forces:
- Driving Forces: forces that encourage and support a proposed change.
- Restraining Forces: forces that work against the proposed change.

Question 20

List and explain Conducting a Force Field Analysis.

Answer 20

1. Identify: identify the driving and restraining forces for the proposed change.
2. Weighting: allocated a score (out of 5) to each force to represent is weighting/strength.
3. Rank: rank/prioritise the top 3-5 driving and restraining forces. Helps understand key drivers and resistors.
4. Response: develop an action plan to reduce the strength of the restraining forces and increase strength of driving forces.
5. Evaluate: Evaluate the response to determine its effectiveness. The managers can then plan for successful change.

Question 21

List the advantages and disadvantages of a force field analysis.

Answer 21

ADVANTAGES:
- Provides managers a clear indication of forces for and against the change.
- Provides clear actions that can be used to minimise strength of restraining forces.
- Can help determine if the change is worth pursuing.
- Identifies most critical factors impacting the change.

DISADVANTAGES:
- Both identifying forces and weighting of the forces is subjective.
- Strong focus on the current state, with a lack of focus on the future state.
- Conducting a thorough force field analysis requires time, effort, and resources.

Question 22

Explain driving forces.

Answer 22

Driving forces: are those that initiate or support change in the business.

• These forces push the business towards a new desired state.

Question 23

Explain the driving force of owners.

Answer 23

• Owners are looking for a return on investment.
• As they pursue profits, they can initiate changes within the business.
• Active owners can be a significant support for change, ensuring that resources are available.
• New owners coming into the business may drive new changes as they may have new ideas on the direction.

Question 24

Explain the driving force of managers.

Answer 24

• Managers can initiate changes as they work towards the vision of the business.
• Managers may review KPls and initiate changes to improve KPI data.
• Strong leaders can help support business change by inspiring others about the benefits of a change and supporting employees.

Question 25

Explain the driving force of employees.

Answer 25

• Employees can instigate change in a business by driving improvements in processes, product features etc.
• Employees can place demands on the owners of the business to improve their conditions.
• Employees can drive innovation within a business which can initiate change.
• Those that believe and are on board with the change can drive the business towards the successful implementation of the change.

Question 26

Explain the driving force of competitors.

Answer 26

Competitors: are rival businesses that are competing for market share.

• The competitive nature of business can initiate change in a business as they compete for customers.
• Competitors can drive changes in business policy, pricing strategies, marketing campaigns, product features, employee pay and conditions and many other aspects of business.

Question 27

Explain the driving force of legislation.

Answer 27

• Laws can be brought in that can force businesses to implement changes to ensure they comply with the changes.
• Failure to comply with changes in legislation can result in legal consequences for the business.
• In recent times, there have been changes to the National Retail Law (NRL). This has forced Coles and other supermarkets to update contracts with suppliers to ensure they have improved in fairness and meet the new legislation.

Question 28

Explain the driving force of the pursuit of profit.

Answer 28

• Businesses will often make changes with the aim of improving profits.
• Businesses can improve profits by increasing revenues or by reducing their costs (or achieving both).
• If net profit figures are not at the desired level it can initiate changes within the business.
• Implementing changes that will improve profits can also be a great support for the change.

Question 29

Explain the driving force of reduction of costs.

Answer 29

• Costs come from all areas of the business.
• Businesses often look to implement changes in order to reduce their costs.
• Change may be initiated as a result of rising costs in the business, or simply to reduce costs further.
• Businesses can implement a range of strategies to reduce their costs. E.g. reducing wastage, purchasing cheaper materials, manufacturing overseas, restructuring.

Question 30

Explain the driving force of globalisation.

Answer 30

Globalisation: is the process where economic boundaries are removed and businesses begin operating on a international scale.

• Globalisation can increase global competition.
• Globalisation allows Australian businesses to make use of overseas resources (E.g. suppliers, or manufacturers).
• Can drive change in a business so they remain competitive.

Question 31

Explain the driving force of technology.

Answer 31

• Technology can impact all areas of the business.
• Technological advancements can drive change in a business as it can improve processes, communication, products, data analysis and efficiency.
• Businesses may need to implement technology to gain or maintain a competitive advantage.

Question 32

Explain the driving force of innovation.

Answer 32

Innovation: is adopting something new or improving on what already exists.

• Innovation can help businesses create new products or services.
• Can help a business reduce costs by improving processes and automating tasks.

Question 33

Explain the driving force of societal attitudes.

Answer 33

Societal attitudes: are the values, ideas, beliefs and expectations of members in society.

• These attitudes can changes over time and can have a significant impact on businesses.
• As societal attitudes change so do consumer preferences. Businesses need to adapt to maintain relevance to their customer base.
• For example: Coles has increased the shelf space it devotes to healthy foods as well as introducing initiatives to reduce food waste.

Question 34

List the driving forces.

Answer 34

1. Owners
2. Managers
3. Employees
4. Competitors
5. Legislation
6. Pursuit of profit
7. Reduction of costs
8. Globalisation
9. Technology
10. Innovation
11. Societal attitudes

Question 35

Explain restraining forces.

Answer 35

Restraining forces: are those that work against a change.

• They make it difficult to implement change successfully.

Question 36

Explain the restraining force of managers.

Answer 36

• Managers can work against a change if they fear they will be impacted. This can often occur in middle and lower management.
• Managers may be resistant to change because it requires them to learn new things, take risks, or make difficult decisions.
• Managers may lack the skills to lead a change effectively which can work against the change.

Question 37

Explain the restraining force of employees.

Answer 37

• Employees are often the ones most impacted by a change and can cause resistance.
• Changes can bring on feelings of fear and anxiety amongst employees.
• Employees may be comfortable with their current work and change can bring challenges for the employee to learn new processes.
• Changes can impact an employee’s day-to day work or even their job security, causing resistance.

Question 38

Explain the restraining force of time.

Answer 38

• Change can be a complex and time consuming process. Not having sufficient time can make implementation challenging.
• It may not be the best time to implement change. For example, the economic conditions may not be ideal, or the business’s finances may not be strong at the current time.
• For example, in 2020 David Jones had planned to close some stores and focus on online sales, but did not have enough time and was in financial trouble before it could implement the changes.

Question 39

Explain the restraining force of organisational inertia.

Answer 39

Organisational inertia: is the unenthusiastic response from a business and management to proposed change.

• There is a tendency for the business to remain on its current trajectory.
• The people within the business are comfortable with the current state of the business, making it difficult to gather momentum towards a change.

Question 40

Explain the restraining force of legislation.

Answer 40

• Legislation or changes in legislation can prevent or make it difficult for businesses to implement their desired changes.
• Legislation can increase the expenses of implementing a particular change.

For example: in 2021, Coles looked to open a supermarket in a Melbourne neighbourhood. Zoning regulations prevented this from occurring.

McDonald’s looked to make changes to its employee rostering system, however the FWC ruled the changes would breach the Fair Work Act.

Question 41

Explain the restraining force of financial considerations.

Answer 41

• Managers need to consider the short-term and long- term costs of implementing a proposed change.
• Changes with significant costs can work against a proposed change.
• Senior managers should conduct a cost/benefit analvsis to ensure that any changes are financially viable and will not place the business under financial stress.
• Businesses should also consider how they will pay for the changes. E.g. use their own funds or take on debt.

Question 42

List the restraining forces.

Answer 42

1. Managers
2. Employees
3. Time
4. Organisational inertia
5. Legislation
6. Financial considerations

Question 43

Explain porter’s generic strategies.

Answer 43

• Michael Porter’s Generic Strategies are used to determine the best way to achieve a competitive advantage in a given market.
• Businesses can implement ONE of Porter’s generic strategies.
• The goal is to be the best in the industry at the chosen strategy, enabling a competitive advantage.

The two strategies are:
- Lower cost
- Differentiation

Question 44

Explain lower cost.

Answer 44

Lower cost strategy is where a business gains a competitive advantage by being the low cost producer in the industry.

Businesses can lower costs in many ways, including:
- Achieving economies of scale
- Improving efficiency (E.g. implementing new technology)
- Cutting costs throughout areas of the business (E.g. having fewer product features, manufacturing overseas, reducing number of employees, purchasing cheaper materials).

Question 45

List the advantages and disadvantages of lower cost.

Answer 45

ADVANTAGES:
- Gains a competitive advantage
- Attracts the price sensitive customers
- Can withstand price wars longer than competitors
- Potential for improved profitability

DISADVANTAGES:
- May be reduced quality perception in the market
- Constantly lowering costs may impact the quality of the product
- If prices are lowered, sales volume needs to increase to make substantial profits
- Can be challenging over the long term if competitors continue to lower costs also

Question 46

Explain differentiation.

Answer 46

Differentiation: is where a business gains a competitive advantage by being unique in some way that is valued by customers.

• Customers are attracted by the unique offering
• Business is able to charge a premium price

Examples of different ways a business can be unique include:
- Design/Product Features
- Brand image
- Technology
- Customer Service
- Relationships
- Distribution

Question 47

List the advantages and disadvantages of differentiation.

Answer 47

ADVANTAGES:
- Gains a competitive advantage
- Can develop brand loyalty
- Reduces price sensitivity (less susceptible to price wars)
- May be able to increase profit margin with the premium price

DISADVANTAGES:
- Often more expensive to be unique
- Premium price may narrow the customer base
- Possibility of being replicated by competitors
- Changing customer preferences may impact a business’s differentiation advantage

Question 48

Explain implementing one strategy.

Answer 48

• Porter stated that businesses should focus on implementing ONE strategy and be the best at that strategy.
• Those that look to implement both strategies, risk being mediocre at both - Stuck in the middle

However, if:
- Implementing lower cost, business cannot produce a poor product with no features.
- Implementing differentiation, business cannot ignore costs is higher costs may offset premium price.

Question 49

Compare Porters strategies of Lower Cost and Differentiation (similarities and differences).

Answer 49

DIFFERENCES:
- The key difference between the two strategies is their focus. The cost leadership approach has an internal focus, with the business looking at generating economies of scale and efficiencies within the business to reduce costs. This compares with differentiation where there is an external focus, it depends on the business creating a unique product or service that meets a customer need and it actively markets and promotes this differentiation.
- Lower cost approach will tend to offer lower prices, benefiting from “price-sensitive consumers”: whereas differentiation tends to offer higher-priced products and attract customers who are quality-conscious and not as sensitive to price.

SIMILARITIES:
- Both are strategies to attain a competitive advantage over competitors.
- Both are easier for large businesses to spend money on research and development to innovate or use economies of scale to reduce costs.

Question 50

Explain the Aldi case study.

Answer 50

• Some 20 years after supermarket giant Coles introduced self-service checkouts, rival Aldi is rolling out the technology in hundreds of stores.
• Retailers says self-service checkouts are fast and convenient, but others complain of surveillance and poor customer service.
• Retailers stress self-checkouts haven’t led to job losses, as staff have been redeployed to restocking shelves, online orders, and click and collect.
• Woolworths says 83 per cent of customers with 20 items or fewer chose self-service checkouts, while two-thirds of people with large shops choose a staffed checkout.
• The retail union is concerned customer frustration over self-serve checkout is contributing to abuse against supermarket staff.