U4AOS1

Question 1

Business change - Proactive & Reactive

Answer 1

Business change - Business’s planned or unplanned response to both internal and external pressures

Proactive change - Is to initiate change rather than simply to react to events

Reactive change - Is to wait for a change to occur and then respond to it

Question 2

Differences between Reactive and Proactive change

Answer 2

Proactive change is prepared for change and has processes in place to deal with it meaning business will implement the change more efficiently as little time is wasted

However, reactive change means that the business will not be prepared to deal with the change, and it may affect their ability to adapt efficiently, with lots of time being wasted as a result

Question 3

Key Performance Indicator

Answer 3

Specific criteria used to measure the efficiency and/or effectiveness of the business’s performance

Question 4

Percentage of Market share

Answer 4

Proportion of the market that a business holds in volume of sale for a good or service, expressed as a percentage

Increase indicates
- Business is taking away sales from competitors and has greater control of the market
- An increase in market share suggests that the business is performing successfully
Decrease indicates
- Business losing competitive advantage as customers choose to purchase from rival competitors

Question 5

Net Profit Figures

Answer 5

Numbers found in an income statement that show net profit - what remains when expenses are deducted from the revenue earned

Increase indicates

• Business is more successful
• Business has successfully implemented a radical change to the business
• Business is identifying new incremental strategies

Decrease indicates

• Business pricing incorrectly
• Business isn’t managing and minimising expenses
• Reduced sales, poor customer service or inadequate management of expenses.

Question 6

Rate of productivity growth

Answer 6

Change in productivity in one year compared to the previous year calculated by outputs divided by inputs

Increase indicates
- Business is using fewer resources to produce outputs, Producing more outputs from the same amount of
inputs, Producing more outputs while using fewer inputs
- Produces good/service at lower per unit cost, improving profitability or pass on cost savings to customer

Decrease indicates
- Business losing competitive advantage as customers choose to purchase from rival competitors

Question 7

Number of Sales

Answer 7

A measure of the amount of goods or services (products) sold

Increase indicates

• Business has implemented successful marketing campaigns, sales training or product innovation
• Business is competitive on price and quality

Decrease indicates

• May discontinue product lines, introduce advertising campaigns for particular products where sales have declined
• Identify potential issues across the business

Question 8

Rate of staff absenteeism

Answer 8

Number of workers who neglect to turn up for work when they are scheduled to do so

Increase indicates

• Decreased job dissatisfaction, personal issues or employee health issues
• Employees not contributing to achieving business objectives

Decrease indicates
- Employees are happy and productive

Question 9

Level of staff turnover

Answer 9

Number or rate, of employees who are leaving the business over a specific period of time, and need to be replaced by new employees

Increase indicates

• Low job satisfaction, OHS concerns, lack of training or career advancement opportunities
• Decrease in productivity through disruption to operations
• New staff will be needed as the employees previously working have left

Decrease indicates

• Recruitment, selection, induction and training processes are successful
• Increase in productivity and potentially
• Employees are happy

Question 10

Level of Wastage

Answer 10

Amount of unwanted or unusable material created by the production process of a business

Increase indicates

• Employees are not adequately trained or processes are poor
• Materials are of a poor quality

Decrease indicates
- Business is minimising waste to operate as leanly as possible decreasing expenses

Question 11

Number of Customer Complaints

Answer 11

Amount of customers expressing their dissatisfaction with the business, either spoken or in written form

Increase indicates

• Reduced sales as customers will move to purchasing goods/services from competitors
• Poor quality goods/services
• Inadequate training or poor processes

Decrease indicates

• High level of customer satisfaction leading to repeat customers
• Both individual concerns and underlying issues dealt with

Question 12

Number of workplace accidents

Answer 12

amount of accidents that occur in the workplace and indicate how safe the workplace is for employees

Increase indicates
Can slow/halt production if shut down by Safe Work Australia
Increase in employee dissatisfaction or staff turnover

Decrease indicates
Training and safety procedures successful

Question 13

Lewin’s Force Field Analysis

Answer 13

Business tool that compares forces for (driving) and against (restraining) forces for change so that an informed decision can be made

Benefits

• Weigh up the ‘for’s and against’ and determine whether the change is worth undertaking
• Identify if skills are restricting change and therefore what training may be required

Limits

• Assigning responsibility to people to manage aspects of the change may result in a need for training as the skills of people may be lacking or overestimated
• Biases can emerge when determining the importance of a particular force

Question 14

Driving forces

Answer 14

Managers - Want business to remain profitable and competitive
Employees - Working in supportive and innovative environment are free to suggest ideas
Competitors - Fear loss to rival if the changes are unsuccessful
Legislation - Changes to law that impact operational practices
Pursuit of Profit - Greater the profit greater rewards for business owners
Reduction of Costs - Financial cost of operating a business can affect profit
Globalisation - Need to compete with overseas businesses
Technology - Stay up to date or risk falling behind
Innovation - Drive and desire to be a market leader
Societal attitudes - Need to reflect what society values

Question 15

Restraining Forces

Answer 15

Managers - Due to either poor decision-making or fear of loss of control or power
Employees - Fearful of changes that threaten job security or require new work routines
Time - Poor timing or lack of time
Legislation - Restrictions placed on certain operational practices
Organisational Inertia - Prefer to stay with the safe and predictable status quo
Financial Considerations - Financial cost of implementing major changes can be substantial

Question 16

Porter’s Lower cost strategy

Answer 16

Strategy where a business aims to become the low cost producer in its industry

Advantages

• A business may become more profitable, as profit per unit can increase
• A business may save money on some costs to allow expansion or development of new lines
• A business may be able to prevent competitors from increasing their market share if they can’t match costs or prices

Disadvantages

• Sales may fall as customers may perceive a product as being of poor quality
• A business may lose its market share if other businesses copy the low-cost approach
• Cost reduction can be difficult to sustain in the long-term as competitors will also aim to reduce cost

Question 17

Porter’s Differentiation Strategy

Answer 17

Use of factors such as brand names, delivery methods and advertising to establish differences between substitutable products

Advantages

• It can help a business gain customer loyalty as they are attracted to the unique offering
• Business is able to charge a premium price for their product
• By developing customer loyalty, market share can be increased

Disadvantages

• Rival businesses can copy the differentiated approach, negating any gains
• Limits the segment of the market