Unit 4 AoS 1

Question 1

Business change

Answer 1

The concept of business change refers to the transitioning of individual employees, working teams, function or the whole business to a new state of operation. This is where the business adopts a new idea or behaviour due to the pressures from the internal and external environments.

Question 2

Key performance indicator’s

Answer 2

Are specific criteria used to measure the efficiency and effectiveness of the business’s performance. KPI’s measure performance, success and the achievement of objectives. They also lead to strategies that seek to optimise and improve performance.

Question 3

KPI’s

Answer 3

• Percentage of market share
• Net profit figures
• Rate of productivity growth
• Number of sales
• Rates of staff absenteeism
• Level of staff turnover
• Level of wastage
• Number of customer complaints
• Number of workplace accidents

Question 4

Percentage of market share

- incl. calculation

Answer 4

Percentage of market share refers o the business’s total industry sales for a particular good or service, expressed as a percentage. It is calculated by dividing the businesses sales (from that market) by the total sales of all businesses in that market and expressing this as a percentage.

How it is calculated:
Market share is calculated by taking the company’s sales over the period and dividing it by the total sales of the industry over the same period.

Question 5

Net profit figures

- incl. calculation

Answer 5

Net profit is what remains when expenses related to operating the business are deducted from the revenue earned. Net profit is often referred to as ‘the bottom line’.

How it is calculated:
Net profit is calculated by subtracting a company’s total expenses from total revenue, thus showing what the company has earned (or lost) in a given period of time.

Question 6

Rate of productivity growth

- incl. calculations

Answer 6

The rate of productivity growth measures the efficiency of the company’s production process. This is the percentage increase in productivity from one period to another.

How it is calculated:
Calculated by dividing the goods and services produced by the total hours a company’s employees worked to produce these goods or services.

Question 7

Number of sales

- incl. calculations

Answer 7

The number of sales refers to the measure of the total customers that bought a good or service in a given reporting period. Measuring the number of sales helps a business evaluate it’s performance, especially it’s marketing strategies.

How it is calculated:
Calculating the number of customers you’ve gained or lost compared to previous periods, you can understand whether or not you are meeting your customers’ needs.

Question 8

Rate of staff absenteeism

- incl. calculations

Answer 8

Rate of staff absenteeism measures the number of workers who neglect to turn up to work when they are scheduled to do so. It is the number of days employees are absent from work as a percentage of their total possible working time. This can suggest that employees are at interviews at other businesses, taking a ‘sickie’ or using their allocated days off rather than being at work.

How it is calculated:
Number of days staff are absent as a percentage of the total number of days staff could normally be working.

Question 9

Level of staff turnover

- incl. calculations

Answer 9

Staff turnover measures the number of staff who are leaving the business. This can be used as an indicator of the degree of staff satisfaction as it can suggest that staff are dissatisfied with the workplace.

How it is calculated:
Calculate the number of employees who have departed the business in a period of time and divide it by the average number of employees working in the business in that period.

Question 10

Level of wastage

- incl. calculations

Answer 10

The level of wastage measure the amount of waste created by the production process. It’s the amount of stock either as raw material or during processing which is discarded. Wastage is increased when storage is insufficient or the production process is insufficient.

How it is calculated:
Number of units or total weight/volume of waste materials discarded from the production line.

Question 11

Number of customer complaints

- incl. calculations

Answer 11

The recorded number of individuals who report a defect, fault or issue in the good or service that they purchase in a given time period. Customer complaints indicate whether or not customers are satisfied with the performance of the business.

How it is calculated:
Recording how many complaints are made by customers in a period of time and comparing that to other periods.

Question 12

Number of workplace accidents

- incl. calculations

Answer 12

The recorded number of worker or customer related injuries that occur in a business in a given time period. The number of workplace accidents indicates how safe the workplace is for employees.

How it is calculated:
Recording how many accidents occur in a set period of time and compare that to other periods.

Question 13

Lewin’s Force- Field Analysis

Answer 13

• Management theorist Kurt Lewin developed the concept of Force Field Analysis
• It is a reactive theory
• Force field Analysis states that in any change situations, counterbalanced forces are at work.
• These can be driving forces (pushing for change) or restraining forces (hindering the change process)
• When driving forces are more dominant that restraining forces, change is like to be successful.
• When driving and restraining forces are balanced, change is likely to be unsuccessful
• When restraining forces are dominant, the change is unlikely to be introduced

Question 14

Using the force-field analysis: step by step

Answer 14

1. define the desired change
2. identify the forces (both driving and restraining)
3. analyse each force and determine their magnitude and which forces can be altered
4. develop a plan on how driving forces can be increased and restriaing forces can be reduced

Question 15

Driving forces definition

Answer 15

work to encourage, foster and initiate change. These sources of these driving forces are varied - each environment in which a business operated places pressure on a business to change.

Question 16

Driving force: managers

Answer 16

Managers have the responsibility if operating a profitable or successful business. The role managers play in the operations of a business mean that are driving forces for change. The personal ‘drive’ that a manager provides to initiate and maintain the momentum of change

Question 17

Driving force: employees

Answer 17

Employees working in an innovative environment, where ideas are shared and acted on, are likely to recommend changes to policies, production processes or products. If employees support and are happy with the change they can be a great force for ‘driving’ changing through the rest of the business influencing others through empowerment.

Question 18

Driving force: competitors

Answer 18

Businesses need to monitor the activities of their competitors and determine what effect they may be having in the marketplace. Knowledge if such changes enables a business to make modifications to it’s existing business activities and to plan new ones.

Question 19

Driving force: legislation

Answer 19

Whenever new laws are passed, businesses must comply with the new legislative requirements. They are requires to respond to local, state and federal government who may bring in legislation for example minimum wages. equal opportunity, anti-discrimination and OH&S legislation.

Question 20

Driving force: pursuit of profit

Answer 20

Profit is one of the key objectives of a business and therefore the pursuit of it is a major driving force for the business managers and owners. If the profit levels of a business are not as high as the management team have identified as their goal it is likely they would need to make changes to either generate more revenue or decrease their costs to earn a decent profit.

Question 21

Driving force: reduction of costs

Answer 21

Reduction in costs in marketing production, human resources raw materials, and staffing are often a key driver of change and can create quick improvements to the bottom line. If costs are rising then profit will be negatively affected and as such may drive the business to change. In these circumstances businesses will seek to implement strategies to reduce costs.

Question 22

Driving force: globalisation

Answer 22

Globalisation is the movement across nations of trade, investment, technology, finance and labour brought about by the removal of trade barriers. The increase in global trade, communication and transportation on a global scale creates many drives for business to change. Globalisation will drive all businesses to change so they remain viable and competitive.

Question 23

Driving force: technology

Answer 23

A business that want to be locally, nationally or globally competitive must adopt the appropriate technologies. Technology allows a business to operate it’s processes and practices more efficiently and effectively, cutting costs and improving productivity. As such technology. and any advances in technology, should be considered as a driving force for change.

Question 24

Driving force: innovation

Answer 24

Is the process that occurs when something already established is improved upon. It is the introduction of new production, modifying existing ones, adapting business methods or business activities and is a major source of competitive advantage for business and therefore a strong driving force for change.

Question 25

Driving force: societal attitudes

Answer 25

Society’s attitudes to what is right and wrong are constantly changing and this affects the ways in which businesses operate. Pressures from the society has caused businesses to implement procedures supporting what they believe is right. Increased access to rapid communications has made the works population more aware of what the business is doing. This drives the business to change many of their procedures to maintain a competitive advantage.

Question 26

Driving forces

Answer 26

- mangers - employees - competitors - legislation - pursuit of profit - reduction of costs - globalisation - technology - innovation - societal attitudes

Question 27

Restraining forces definition

Answer 27

are those forces that work against change, creating resistance. A range different forced hinder or restrain change.

Question 28

Restraining force: managers

Answer 28

Some managers may make hasty decisions that are poorly times and unclear. Other managers may be indecisive and put off making decisions, creating uncertainty. Either of these situations may eventually cause employees to loose confidence in the decision-making abilities of management.

Question 29

Restraining force: employees

Answer 29

Any change to a business and it’s operating procedures will eventually impact on the level and type of staffing. The introduction of a major change, such as a merger or actualisation may result in a complete breakdown of the existing corporate culture. This can create a feeling of mistrust and suspicion among the employees.

Question 30

Restraining force: time

Answer 30

Change is ongoing and as such their is always pressure for change. Some of these pressures occur quickly and so businesses for not have the time to plan the change as efficiently and effectively as they would like.

Question 31

Restraining force: organisational inertia

Answer 31

Organisational inertia refers to an unenthusiastic response from management to proposed change. It can be referred to managements inactivity or lack of response when faced with proposed changes. Some managers resist change because it requires moving outside and way from their ‘comfort zone’.

Question 32

Restraining force: legislation

Answer 32

Legislation can sometimes make it hard for businesses to change in the way they want to. Legislation must be complied with, and it can act as a restraining force. This occurs when the legislation places restrictions on certain operational practices and procedures.

Question 33

Restraining force: financial considerations

Answer 33

Financial considerations include cost and revenue issues for a business. The financial cost of it’s implementation can retain a change. Even given sufficient finances, a business contemplating change must weigh up the costs and benefits of the change.

Question 34

Restraining forces

Answer 34

- managers - employees - time - organisational inertia - legislation - financial considerations

Question 35

Porter's genetic strategies

Answer 35

- Michael Porter’s theory is a strategic management theory which describes how a business can seek to acquire a competitive advantage in it’s industry or market. - It is a proactive theory. - There are two generic strategies (cost advantage and differentiation) - Porter states that businesses should focus on one strategy rather than attempt to implement both - Businesses that implement both strategies risk being ‘stuck in the middle’ - Before deciding which strategy to implement, business should look at the 5 competitive forces in their industry and assess their own strengths and see what they can take advantage of

Question 36

The five competitive forces

Answer 36

- supplier power: how easy it is for suppliers to drive costs up - buyer power: how powerful buyers are in driving prices down - threat of substitutes: looks at the number and capacity of competitors - threat of new entrants: how easy it is for customers to find a similar good or service - competitive rivalry: how easy it is for new competitors to enter the market

Question 37

Porter's two key approaches

Answer 37

- lower cost | - differentiation

Question 38

Lower cost

Answer 38

A business manager decides that their strength is to become the lowest cost producer of a product in their industry. This will give them competitive advantage in that they can now sell their products at a cheaper more “customer attractive” price than their rivals whilst still maintaining their profit margins and thus increasing sales and market share. This appeals to “price conscious” consumers.

Question 39

Differentiation

Answer 39

A business manager decides that their strength is to be more innovative and creative than their competitors and create goods and services that have a unique point of difference to their competitors. This differentiation will make their goods or services more “customer attractive” thus increasing sales and subsequently market share .

Question 40

Choosing the right generic strategy

Answer 40

Step 1: conduct a SWOT analysis Managers should consider the strengths, weaknesses, opportunities and threats in relation to each strategy. Step 2: use 5 forces analysis The five forces of supplier power, buyer power, competitive rivalry, threat of substitution and threat of new entry should be examined to understand the nature of the industry and assist in determining and strengthening competitive advantage. Step 3: compare the SWOT analysis with the Five Force Analysis The results of both the SWOT analysis and Five Force Analysis are compared to determine the best strategy that should be selected for the business to gain a combative advantage.