Unit 4 Flashcards
(140 cards)
1
Q
Business change
A
A business’s planned or unplanned response to factors from the business environment. These changes can be radical (major changes) or incremental (smaller changes)
2
Q
Leadership
A
The motivating and inspiring employees to achieve business objectives
3
Q
Relationship between leadership and change
A
During times of change, business objectives alter and leadership helps motivate employees to achieve these newly set objectives.
4
Q
Attributes of a leader during change
A
- Diagnosing
- Adapting
- Communicating
- Building commitment from employees
5
Q
Diagnosing
A
Being able to understand the situation as it is now and knowing what could be expected in the future.
6
Q
Adapting
A
Being able to adapt behaviour and other resources to help close any performance gaps.
7
Q
Communication
- Define
- How good leaders possess this
A
Passing of information from sender to receiver
- How good leaders posses
this - - Good leaders prepare people within the business for change
- Communicate the reasons for change, the change/s to take place and the impacts on employees and the business
- Good leadership is imperative as employees need to feel well-informed and to answer questions / ease employees concerns
- Relationship needs to remain strong and trusting
8
Q
Building commitment from employees
- How good leaders posses this
A
How good leaders possess this -
Involves training employees, building work teams and putting systems in place to help implement the change
Strong leaders continue to support employees through change and motivate them towards the new state
Hurdles will arise that need to be overcome - good leaders will support employees during these difficult times to continue to see and strive towards the end goal
9
Q
Importance of leadership
A
- Important during times of change so a clear vision is created and communicated to the key stakeholders
- Good leaders display empathy and good listening skills to all stakeholders (within both radical and incremental change)
- Without effective leadership, it can be difficult to get all stakeholders on the same page and resistance can arise - making it difficult to implement the change successfully
10
Q
Key performance indicators
A
Measures or a set of data that allows a business to determine whether it is meeting its business objectives
- Provide management with information that helps it to make decisions
- Managers need to respond to the information KPI’s provide to them
11
Q
Management strategies to respond to KPIs
A
- Staff training Staff motivation Change in management styles of management skills - Investment in technology - Improve quality in production - Cost cutting - Initiating lean production - Redeployment of resources
12
Q
Staff training
A
Training os concerned with the changing of employee behaviour and job performance - emphasising immediate improvements in job performance by developing their skills and knowledge
13
Q
Staff motivation
A
Employee motivation is the level of commitment and creativity that employees bring to their jobs. Motivation is concerned with the desire to do things
14
Q
Change in management styles of management skills
A
The way a manager leads in a business
15
Q
Investment in technology
A
A strategy that can be used to improve the performance of a business. Technologies can be implemented to improve workplace safety, boost productivity or enhance quality.
16
Q
Improve quality in production
A
Quality relates to good or services that fully meet customer requirements. Products or services with higher quality will have an advantage over competitors.
17
Q
Cost cutting
A
Strategies that focus on reducing expenses
18
Q
Initiating lean production
A
Lean production is a management philosophy which is famous for reducing wastage at all levels of the operation system without compromising on quality
19
Q
Redeployment of resources
A
Redeployment is the transfer of resources from one place to another. A business will redeploy its resources to make better use of them, which means that a business is able to attract more value or output from these resources.
20
Q
Seeking new business opportunities
A
- Source of change
- Managers should take advantage of both domestic and global opportunities
21
Q
Domestic opportunities
- Define
- Sources of opportunity
A
Prospects of business available within the same country as the business
Sources of opportunity -
- Diversifying products
- Partnerships and alliances
- Acquisition (takeover)
- Mergers
- Franchising
- Opening new locations
- Government assistance (funds & advice)
- Developing a web presence
22
Q
Global opportunities
- Define
- Sources of opportunity
A
Prospects of business available internationally
Sources of opportunity -
- Exporting
- Foreign direct investment
- Developing a web presence
- Joint ventures
23
Q
Diversifying opportunities
- Define
- Example
- Ways to diversify
A
Expanding the range of products an organisation sells
- Allows organisations to have streams of income
Examples -
- Nike - Sell shoes, clothes and luggage
Can diversify by -
- Offering complimentary products and services
- Participating in new industries
- Finding multiple uses for its products
24
Q
Partnerships and alliances
- Define
- Examples
A
Where two or more organisations join together to help each other increase sales and gain new customers
- Organisations often complement each other with the goods and services they sell and can make sure of each others client bases
Examples -
- Hairdresser may form partnership with beauty/nail salon
- BARRE society partner with wax gallery and promote each other on instagram
- Wedding photographer may partner with a wedding videographer
- Wedding venues partner with florists, caterers, photographers
25
Acquisition (takeover)
- Define
- Examples
Where organisations decide to purchase another business
Examples -
- CBA purchased Bankwest during GFC
26
Merger
- Define
- Example
Where organisations decide to legally join forces with another business and the two become one business entity
- Allows businesses to become a more dominant player in the market, taking marketshare away from competitors
Examples -
St George and Westpac
27
Franchise
- Define
- Examples
A business relationship where the franchisor (owner of the business) assigns others (franchisees) the right to market, sell and distribute the goods and services
- Franchisees pay a fee to use franchise company name, logo, image etc
- Franchisor receives ongoing fees from franchisee
- Franchisor offers ongoing support, usually controls all marketing and advertising of the overall business
Examples -
McDonalds, Subway, Boost, IGA, 7 Eleven
28
Open new locations
- Define
- Examples
Expanding by opening operations in new areas
- Helps organisations gain more revenue as they attract customers in a new location
Examples -
Myer, Cotton On, The Good Loaf
29
Government assistance
- Define
- Example
Provide organisations with access to funding and advice on how to grow
Example -
- Local industry fund for transition (by Vic state government) provides financial grants to eligible companies that want to expand their operations in the Melbourne / Geelong area
30
Developing a web presence
- Define
- Examples
A strategy allowing organisations to seek new opportunities through website and e-commerce reaching new customers from different locations
- Can reach globally and a simpler way to expand the business and gain a larger clientele
Examples -
- ASOS - online
- Frankie & Co - Instagram, online store and outlet
- Boohoo - online
31
Exporting
- Reasons
- Considerations
International trade where goods and services from one country are shipped to another for sale or trade
Reasons -
- Allows Australian businesses to sell their products into new global markets which increases the amount of business they receive - occurs if product is not available in the country or if Australia prices are more competitive
Considerations -
- Exported goods need to go through customs (added costs which the consumer pays)
- Exporting organisations need to be aware of of laws impacting on the goods and services into various countries - tariffs, product safety etc
32
Foreign Direct Investment
- Define
- Example
Where a business in one country makes an investment within another country by either acquiring a foreign business or establishing operations independently in another country
Example -
Cotton On have invested overseas by setting up retail outlets in foreign countries
33
Joint ventures
- Define
- Example
Where a business in one country forms an alliance with a business from another country to do business together
- Allow each party in alliance to benefit from each other and grow their customer base
Example -
QANTAS formed joint venture with China Eastern airline - both airlines aim to help each other grow their business and improve their services
- Allows airlines to open new flight routes which attract new / more customers
- Operate out of same terminal in Shanghai - greatly reducing transit times and better customer satisfaction
34
Description of senge's learning organisation
| - 5 Principles
The learning organisation was developed by Peter Senge. A learning organisation is a business that facilitates the learning of its people and an continuously transforms itself. Senge found that learning organisations were more flexible and adaptable and would excel during time of change.
The learning organisation is based on 5 principles which are, personal mastery, mental models, shared vision, team learning and systems thinking which is the cornerstone of the learning organisation. Senge states that all five principles need to be present if a business is to be a learning organisation as each relies on the others and do not operate in isolation.
35
Key features of Senge's learning organisation
Senge Believes that a learning organisation is one that is flexible, adaptive and productive. Learning organisation requires a more contemporary form of leadership. Leaders in the learning organisation are designers, stewards and teachers.
- The learning organisation is a business that facilitates the learning of its people and continuously transforms itself
- Learning organisations excel during times of change because they are more adaptive and flexible
- The 5 principles need to be present to be a learning organisation and they work as a system, not necessarily in isolation.
- Businesses need to develop an environment where employees are encouraged to learn and grow together, which enables the business to learn and grow.
36
Principles of learning organisation
- Systems thinking
- Personal mastery
- Mental models
- Shared vision
- Team learning
37
Systems thinking
The ability to see the big picture rather than seeing things in isolation.
One area of the business will impact another, and it is important that managers understand these interrelationships.
38
Personal mastery
Where individuals are committed to developing themselves. Individuals create a vision for themselves and are committed to following their passion. Senge states that those that have high levels of personal mastery are more committed, take more initiative and have a deeper responsibility in their work. Businesses need to build an environment where learning is for everyone and individuals are encouraged to challenge the status quo.
39
Mental models
The deeply ingrained assumptions, generalisations and images of how people understand the world. These beliefs and values direct how we behave. Mental models are the widely established beliefs, impressions and illusions of how people understand the world.
During a change the business and its people need to look at themselves and scrutinise what they do.
40
Shared vision
Where the people within the business work towards a common cause that they believe in. The shared vision provides a focus for the people within the business on where they are heading. Having a shared vision creates commitment to the cause rather than compliance.
41
Team learning
Where individuals come together as a team to learn and grow together. Teams that are aligned will move in the one direction and although individuals will have different skills and knowledge, the team will be able to work well together and learn together.
42
Leading the learning organisation
Senge argues that learning organisations require a new vision of leadership. He believes traditional leaders are too individualistic and feels that leaders of a learning organisation enable people to continually expand their understanding and capabilities.
43
Key aspects of leadership
- Leader as designer
- Leader as steward
- Leader as teacher
44
Leader as designer
key areas of design in the business are policies, strategies and systems. Senge argues that no one has more influence than the designer of these elements. For example - designing the mission, values and core values can give the businesses direction and purpose. The leader’s task is to design the learning process that allows the people in the business to deal with the critical issues they face.
45
Leader as steward
Senge found that leaders learn to see their own vision a part of something larger. Leaders become steward of the vision and their task is to manage it for the benefit of others - like a plane steward looks after passengers.
46
Leader as teacher
This is about creating an environment for everyone to learn. Leaders focus on the purpose of the business which allows them to see the big picture. This allows them to understand what the business and its people are wanting to become. Understanding this fosters an environment where people learn from each other with their overall picture of the business in mind.
47
Low risk strategies
- Define
- Strategies
Approaches that have a reduced chance of backfiring and cousin large amounts of employee resistance if used
Startegies -
- Two - way communication
- Empowerment
- Support
- Incentives
48
Two way communication
Where managers and employees are open and honest in their communication.
- Information is kept two way so everyone is in the loop. This helps to reduce anxiety.
- Communication helps employees see reasons for change and the impacts it may have on them
- Change agents must demonstrate benefits of the change so employees can see logic behind it. This results in employees supporting the change.
- Two-way communication enables employees too express concerns and ask questions
49
Empowerment
Where employees are given power or authority to be involved in the change.
- Employees can help design and implement the changes.
- This greatly reduces resistance as employees are less likely to go against the decisions made involving the change.
- Empowerment is a powerful driving force for change.
50
Support
Is about providing emotional and functional support for employees facing hardships due to the change.
- Appropriate support should be provided for employees through training or redeployment of services to assist them in finding new employment.
- Those remaining within the organisation through the change need to be listened to and given time to adjust.
51
Incentives
- Define
- Examples
About negotiating with resistors an offering them incentives to help gain support for change.
Example -
Offering trade - offers that provide special benefits in exchange for the reassurance that change will not be blocked.
- Incentives could include - Promises of improved working conditions (longer breaks and better staff facilities) or financial incentives (higher wages or performance bonuses)
52
High risk strategies
- Define
- Strategies
Approaches that have a greater chance of generating negative outcomes if used
Startegies -
- Manipulation
- Threats
53
Manipulation
- Define
- Risks
- Example
Aims to gain support for change by using cover tactics to influence employees
- Management may secretly leak information to employees, or provide only some of the facts so the change is able to gain support
- Some managers may even buy off leaders of the resistance in order to gain support for the change
Risks -
Once discovered by employees may result in;
- Loss of loyalty or trust among staff
- Resistance to change
- Damages the relationship in the long term
Example -
Introduction of new technology - Management inform staff of exciting new training and promotional opportunities but withhold information that results in forced redundancies
54
Threats
- Define
- Ways to threaten and impacts
- Risks
Using force to get employees to accept the change.
- Employees can be threatened with a number of undesirable consequences including; loss of job promotion, transfer, loss of benefits, demotion or a poor reference.
- Threats can allow change to happen quickly, it can erode positive relationships formed - “quick fix solution”
- Employees might accept change on the surface, but genuinely be unhappy and resentful.
Risks -
- Negative impact on morale, work ethic and business performance
- Increased resistance, grievance complaints, compensation claims (stress and harassment) and industrial disputes
55
Lewin's three step change model
The success of change is determined by two sets of forces:
- Driving forces
- Restraining forces
To lead successful change and move away from the status quo the change agent should work to reduce the restraining forces and increase the number of driving forces.
56
Key steps in Lewin's three step change model
- Unfreeze
- Change
- Refreeze
57
Unfreeze
Ensures that employees are ready for change, creating a need for change and working to reduce resistance to change
58
Change
Execute the intended change, implementing the change and ensuring people are trained, resources are in place and obstacles are removed.
59
Refreeze
Ensures that the change becomes permanent and embedded in the culture, reinforce the changes, evaluate the results of the change and adjust if necessary
60
Positive and negative effects of change for employees
Positive -
- Possibilities for career development and new training options
- Individual productivity can be increased
- Increase staff satisfaction and staff morale
- More job opportunities and chance for promotions with new changes
- Better improved working conditions
- Changes in positions, tasks or skills to benefit employees
- Staff can become more efficient in their roles as processes are altered
- New roles / responsibilities can boost morale
Negative -
- Possible loss of jobs - made redundant or job insecurity
- Resistance against the change
- Employees may be unhappy or unsatisfied by the change - will effect morale, productivity, working conditions etc
- Cultural changes might mean difference in processes, policies, values, uniform etc
- Change can lead to anxiety and stress of employees due to fear of the unknown
- Forced to move to new locations or departments
- Change threatens disruption to normal routines and processes causing discomfort
61
Positive and negative effects of change on customers
Positive -
- Business may become more suitable to what the customer is looking for
- More satisfied with the product
- Better quality of products
- Better prices to suit customers
- If cutworms are being distend to, makes them feel valued - loyalty and repeat sales
- Continuous improvement / updates of range of products
Negative -
- May become less suitable and no longer rely on that business
- Loss of customers if products no longer available or change in products / range
- Customer complaints about the changes if poorer quality, increased prices
- Word of mouth - dissatisfaction with changes can lead to consumers spreading word about the poor decisions made by management
62
Positive and negative effects of change on suppliers
Positive -
- Change may result in more business and an increase in products being sold as a result of an increase in the amount of products being needed
- Change in organisation / supplier contract - building on the relationship as both rely on each other for success
- New contracts formed which brings about new products, supplies, materials which are environmentally friendly, of better quality (sustainable and durable) and competitively priced
Negative -
- Business may choose to change suppliers, therefore there will be a loss in business
- Loss of business if contract ceases between the two - resulting in possible less profits
- New changes in organisations (i.e implementation of technology to increase efficiency) may mean faster need of supplies from suppliers who need to meet the organisations schedule
63
Positive and negative effects of change on managers
Positive -
- May result in more power and control, especially if the manager is the leader of the change
- New change can increase authority/status/role within the organisation
- Opportunities to develop their skills as a leader, especially during the change
Negative -
- Loss of power / control
- May need to change their management style to suit the new change
- Increased stress and anxiety because change may increase work load, increased resistance from employees
- Time and skills to deal with changes and resistance to change
- Responding to all stakeholders questions and concerns regarding the change as well as carrying out usual job
- Have to embrace the change which may result in an increased level of stress and anxiety due to many aspects of change under their control
64
Positive and negative effects of change on Community
Positive -
- New jobs / opportunities available in the community
- Using local people and suppliers supports the local community / economy
- If the business decides to change or expand the types of goods and products made or distributed it will benefit the community and possibly fill a market need in that community
- The change may result in more natural or non-renewable resources being used instead better for the environment of that area
- Increase in traffic / people to community to buy products not available elsewhere
Negative -
- If the business decides to relocate to another area or state this will effect the community by resulting in a loss of employment
- Increased stress on community if using local resources to continually provide for organisations
- If organisation chooses to outsource, creates job loses in the community
- Closing down due to change or lack of support for the change
- If a bigger business opened up in town and took over local shops e.g new Woolworths - IGA, FoodWorks (local)
65
Corporate Social Responsibility (CSR)
The commitment by organisations to conduct their business in an ethical manner, to take responsibility for the economic, social and environmental consequences of their activities, and to be accountable to a wide range of stakeholders.
66
CSR considerations when implementing change
- Honesty
- Support
- Sustainability
67
Honesty
Making sure the business is open too communication of the change and impacts
68
Support
The change will impact some more than others, managers need to support those who are affected most show sympathy and empathy, offer advice, guidance, counselling, etc
69
Sustainability
Should consider impacts that change has on the environment and ethical practices.
70
Impact of implementing CSR on Employees + Managers
- May find their tasks and jobs are modified due to CSR considerations
- Need to up-skill their qualifications
- Managers might have to make decisions. long and short term, as to how the business might run
71
Impact of implementing CSR on Shareholders / Owners
- Might decide to provide sponsorship to local or other community groups
- Development of public policy through research and development
- Might be involved in corporate philanthropy
72
Impact of implementing CSR on Customers
- Customers may find that they prefer to purchase goods and services from businesses the have a CSR outlook
- Ensure it has sound sound environment and social policies if it wishes to retain or expand its marketshare
73
Impact of implementing CSR on Suppliers
- Some suppliers may have to change their own policies and processes to ensure that they meet the demands of the business they deal with
- Some will have to develop their own code of ethics or conduct to conform with other business requirements
74
Impact of implementing CSR on Community
- The public and general community is increasingly interested in social responsibility and sustainability.
- Businesses that have a poor record in terms of impact on the environment and those that do not contribute beyond their core business will find a decline in their reputation
75
Reviewing the effectiveness of transformation
Businesses can use KPIs to evaluate its performance and strategies to transform the business. To see if the change has been effective and worthwhile the business can turn to the KPIs again. If data from a KPI was the reason that initiated the change then evaluating the effectiveness of the change should be done by assessing the same KPI to see if the change has generated better results. Without evaluating the effectiveness of the change, a business will not know if the change has been successful.
Using KPIs to evaluate organisational performance, then implementing strategies in response to the information provided from the KPI analysis and then using the same KPI to see if the change has been effective.
76
Managers role in reviewing the change
When deciding on what the change is going to be, managers also need to decide how they will evaluate the effectiveness of the change. Managers also need to know the reasons/factors for the improvement and if they align with the KPI. Businesses also need to see if the KPI previously used to influence the change is generating better results. Managers need to report any evaluation of the change back to key stakeholders, including employees. If this is positive, it can help to maintain momentum for the change as employees and other stakeholders are seeing the hard work is paying off. It is also important to highlight if the change has been ineffective, as modifications can be made to turn things in a more positive direction.
77
Business change
Any alteration to a organisation and/or its work environment
Business change is any alterations to a business and/or its work environment and it can come in many forms, it can be planned or unplanned in response to any internal or external pressures, such as a change in the market, competitors or a change of management style. Change may also be radical, major changes that are very disrupter to the business or incremental, changes that occur more frequently that are less disruptive. To deal with change managers must be effective and have proactive and reactive management.
78
Forms of change
- Planned or unplanned
- Response to internal or external pressures
- Can be radical (major changes that are very disruptive)
- Can be incremental (smaller changes that occur more frequently and are less disruptive)
79
Reactive
Waiting for the change to happen and then responding
80
Proactive
Predicting changes before they occur and taking actions before it is too late
81
Reasons for change
| - External & Internal
External Factors -Uncontrollable
- Globalisation
- Economic
- Legal / Political
- Technological
- Competitors
- Changing customer preferences
- Suppliers
Internal Factors - Controllable
- Financial performance
- Need for update / change
- Change in management / owner
82
Key Performance Indicators (KPIs)
- Define
- List
Measures or a set of data that allows a business to determine whether it is meeting its business objectives
- Net profit figures
- Number of sales
- Percentage of marketshare
- Rate of productivity growth
- Level of staff turnover
- Number of customer complaints
- Level of wastage
- Number of workplace accidents
83
Net profit figures
Remaining figure after expenses are deducted from revenue earned
84
Number of sales
Measure the amount of products sold
85
Percentage of marketshare
The proportion of total industry sales that a business has, expressed as a percentage, compared to its competitors
86
Rate of productivity growth
Measures change in output in one year compared to the previous year
87
Level of staff turnover
The rate in which employees fail to attend work on any given day
88
Number of customer complaints
The amount of consumers who are unhappy with the business and/or its operations who have expressed their concerns to the business
89
Level of wastage
Measures the amount of waste produced by the production process
90
Number of workplace accidents
Measures the amount of incidents that have occurred in the work environment and indicates how safe the workplace is for its employees
91
Financial and non financial performance indicators
Financial -
- Net profit figures
- Rate of productivity growth
- Percentage of market share
- Number of sales
Non-Financial -
- Number of customer complaints
- Level of wastage
- Rate of staff absenteeism
- Level of staff turnover
- Number of workplace accidents
92
Benchmarking
When organisations measure their performance against leading organisations known for their excellence
93
Lewin's Force field analysis
- Define
- Principles (features)
Process of determining which forces drive and which forces resist proposed change
Features -
- Developed by Kurt Lewin in 1969
- Is a tool used to compare forces for and against, so decisions can be made
- Allows managers to assess the forces for change and those against the change - giving clear perspective what organisations are up against if change is worth implementing
- Lewin believed their to be a 1 in 3 chance of change being successful
94
Steps users should take identified by the force field analysis theory
1. Define the target of change
2. Identify the driving and restraining forces
3. Analyse the forces which can’t be changed
4. Develop an action plan on what can be changed
95
Status Quo
The existing state of affairs
96
Driving forces
Forces that initiate, encourage and support change
97
How are managers driving forces
- Define managers
- How they are driving
A person responsible for controlling or administering an organisation or group of staff
How they are driving -
- Have influence
- Provide strategic direction for the change
- Initiate change
- Leadership
98
How are employees driving forces
- Define employees
- How are they driving
Those who work for an organisation
How they are driving -
- Supportive employees help change
- Influence others
- Provide new ideas and innovation
- Offers career development which will encourage employees
99
How are competitors driving forces
- Define competitors
- How are they driving
Other businesses or individuals who offer rival or competing goods or services to the ones offered by the business
How they are driving -
- Businesses can see what competitors are doing and respond to change quickly
- Businesses feel the need to stay ahead
- Need to come up with change to keep ahead or rivals
100
How is legislation a driving force
- Define legislation
- How is it a driving force
A law made by parliament
How is it a driving force -
- Must follow legislation therefore it cannot be ignored if the business needs to change an aspect of their environment or operations to follow the law
101
How is reduction of costs a driving force
- Results in more profits
| - Main driver for change and one of the quickest ways to improve profitability and business performance
102
How is globalisation a driving force
- Define globalisation
- How is it driving force
The process of increasing interdependence between countries, removing economic boundaries and creating free international trade and capital between countries
How it is a driving force -
- Helps businesses to grow and increase sales
- Increases profits
- Cheaper sourced inputs can be imported
103
How is technology a driving force
- Define technology
- How its a driving force
Practical application of science to achieve commercial or industrial objectives
How it is a driving force -
- Broadens the markets available
- Provides a cheaper store than brick and mortar if the business chooses to be online
- Increases productivity and efficiency
- Long-term lowered costs
104
How is innovation a driving force
- Define innovation
- How it is a driving force
Refers to changing or creating more effective processes, products and ideas
How it is a driving force -
- By being innovative it gives businesses a competitive edge
- Allows larger businesses to compete on a global scale
- Increases profits and market share
105
How is societal attitudes a driving force
- Define societal attitudes
- How is it a driving force
The current approaches of the community
How it is a driving force -
- Adds to the growth of new industries
- Increased participation of woman
- More flexibility in working hours
106
Restraining forces
Forces that work against the change creating resistance
107
How are managers a restraining force
- Define managers
- How they are a restraining force
A person responsible for controlling or administering an organisation or group of staff
How they are a restraining force -
- May stop change from occurring
- Poor decision making
- Fear of loss of control or power
- Don’t have the skills or experience to deal with change
108
How are employees a restraining force
- Define employees
- How they are a restraining force
Those who work for an organisation
How they are a restraining force -
- Fearful of changes that threaten job security or requires new work routines
- May make change difficult if they don’t feel appreciated
- Fear of the unknown
109
How is time a restraining force
- Time can be a restraining force for change if there’s either poor timing or lack of time to accept / adopt change
110
How is organisational inertia a restraining force
- Define organisational inertia
- How it is a restraining force
The lack of ability of a business to react to internal and external pressures for change as it tends to continue on its well-entrenched way
How it is a restraining force -
- Organisational inertia can be a restraining force if management are unenthusiastic to change and prefer to stay with the safe and predictable status quo
111
How is financial considerations a restraining force
- Substantial costs of implementing major changes
112
Porters Generic strategies
| - List the three key generic strategies
- Lowering costs
- Differentiation
- Focus
113
Lowering costs
- Explain
- Aims
- Outcome for the business
- Examples of businesses
Where the business aims to become a low cost producer to appeal to customers who may be price sensitive
- Involves being the leader in terms of offering lower prices that its competitors for an equivalent benefit but customers must see the value of the goods and services offered
Aims-
- Low costs produces aim to offer a standard or 'no frills' product at competitive prices
- Gain a competitive advantage and gain market share
- Appeal to price sensitive buyers
Outcome -
- If businesses can implement in this strategy and maintain it, the business will be able to be an above average performer in its industry provided it can common prices at or near the industry average
Examples -
- The reject shop
- Daiso
114
Ways to gain a cost advantage
- Reconfigure the value chain
| - Control cost drivers
115
Value chain
- Define
- List activities
The activities performed by the business to design, produce, market, deliver and support its products
Activities -
- Inbound logistics
- Operations
- Outbound logistics
- Marketing sales
- Procurement
- Human Resources
116
Inbound logistics
| Value chain
Activities associated with receiving, storing and distributing inputs
117
Operations (Value chain)
Transforming inputs into outputs
118
Outbound logistics (Value chain)
Collecting, storing and distributing products to consumers
119
Marketing sales (Value chain)
Activities involved in enhancing the value of the product
120
Procurement (Value chain)
Obtaining inputs
121
Human resources (Value chain)
Establishing, maintaining and terminating employees
122
How to reconfigure the value chain
To adopt more efficient ways to design, produce, distribute or market the product. e.g produce a standard product in mass volumes
123
Cost drivers
- Define
- Aims
- List key cost drivers
- Outcome for business that manage their cost drivers
The areas or activities of business that generate costs while the business is producing and selling the goods and services.
Aims -
To work on reducing costs to gain a competitive advantage
Key cost drivers -
- Economies of scale
- Linkages
- Integration
- Location
Outcome -
Businesses that can analyse its cost drivers and make adjustments can help it to gain or maintain a cost advantage, opportunities to reduce costs can arise at any time and management need to take advantage of them
124
Competitive advantage
Refers to the point of difference or superiority over ones competitors
125
Differentiation
- Define
- Outcomes for the business
- Leads to...
- Examples of businesses
Where a business seeks to be unique in its industry in some way that is valued by consumers
Outcomes -
- Businesses that can differentiate to meet customer needs are able to charge premium prices as the cost is not an important consideration
- Businesses are rewarded by being able to command premium prices, sell more goods and services at a given price or gain customer loyalty.
- If businesses can successfully differentiate themselves, it will be able to be unique and stand out to its buyers.
Leads to -
- Differentiation can lead to a competitive advantage - its still important to manage costs because a business the differentiates must maintain similar costs to its competitors.
Examples -
- Chanel
- Nike
- Louis Vuitton
126
Differentiation Approach is appropriate when
- The target customer segment or market is not price sensitive
- The market is competitive
- Customers have specific needs which are not being met or addresses as well as they should be
- Businesses who differentiate should have the resources ad capabilities to satisfy the customers needs in ways that other businesses cannot copy.
127
Common ways businesses can differentiate themselves
- Procurement
- Marketing
- Relationships
- Innovation
- Training
- Distribution
- Location
128
Procurement (Differentiation)
Purchasing premium inputs that greatly enhance the quality of the end product
Patents - Patents or other intellectual property that secures the uniqueness of a product or part of a product
129
Marketing (Differentiation)
Highly effective sales and marketing campaigns can help to highlight or showcase the unique qualities of a product
130
Relationships (Differentiation)
Forming relationships with high profile / talented personnel that are associated with the product
(e.g Nike’s Air Jordan shoes continue to e the leading selling shoe die to Micheal Jordan’s involvement)
131
Innovation (Differentiation)
Introducing new or revised innovative processes, such as Coles and Woolworths implementing new distribution and storage processes that helped to improve the quality of their fresh food produce
132
Training (Differentiation)
New training programs that greatly enhance the skills and abilities of employees
133
Distribution (Differentiation)
Improved delivery systems that allow businesses to get their products to the consumer faster - especially important for online businesses
134
Location (Differentiation)
Ensuring the location of a business or its product offerings maximise chances of it standing out from its competitors
135
Economies of scale (Cost drivers)
operating more efficiently by producing in larger quantities; spreading the overall costs of the business across larger volume of products which produces cost per product produced
136
Linkages (Cost Drivers)
managers need to understand how different activities relate to each other in terms of reducing costs
137
Integration (Cost drivers)
where businesses perform tasks themselves rather than outsourcing to the market
138
Location (Cost drivers)
locations differ in their costs relating to wages, raw materials, utilities, taxes etc
139
Should an organisation implement both of Porter's generic strategies
(2 marks)
A business should not implement both strategies as this will result in a "stuck in the middle" situation where the business has only partly achieved each strategy which is not effective. In trying to achieve both the business will lose focus and neither strategy can be achieved to its full extent
140
Outline the importance of using KPIs to evaluate the effectiveness of business transformation
(2 marks)
Key performance indicators (KPIs) are important when evaluating change as they help to determine if the changes have been successful. The KPIs that initiated the changes should be re-evaluated to determine if there was an improvement which will help to determine if the changes made were successful
