Driving Forces: KK5

driving forces

a force that encourages, stimulates, and incites change; they assist the business in achieving their goals

what are the driving forces

• owners (shareholders)

• managers

• employees

• competitors

• legislation

• pursuit of profit

• reduction of costs

• globalisation

• technology

• innovation

• societal attitudes

owners & shareholders

• owners often drive change in organisations because their livelihoods and income are dependent on the success and profitability of the business

• shareholders typically want high returns on their investment and therefore exert pressure on the business to improve profitability

managers

• managers will drive from within (internally) to help meet the objectives for themselves (promotions, bonuses, recognition) and the business (profit, market share, ect.)

• businesses sometimes face a crisis. responding to such unplanned changes requires responsive decision-making from management to reduce the disruption to the business.

employees

• employees want job security, increased wages/salaries, satisfaction, training opportunities, feedback, & recognition

• employees are vital for change

• many employees are stimulated and motivated by an environment that fosters innovation and creativity

• when working in an innovation environment, employees are likely to recommend changes to policies, production processes, or products

competitors

• competitors can impact businesses by stealing market share and are therefore one of the primary drivers of change

• competitors also drive change because a business will either look to:

  • gain a competitive advantage over a competitor

  • imitate a competitor who has been successful

  • pre-empt a competitor from gaining an advantage

• specific ways in which competitors drive change include:

  • when a competitor changes price

  • a new competitor emerges or a current one grows / expands

  • competitor releases a superior new version of a product (e.g., Sony releases a new gaming console)

  • a competitor initiates a new marketing campaign

legislation

• changes in legislation often compel businesses to change by restricting their behaviour or by forcing them to behave in a particular way

  • for example new environmental legislation limits CO2 emissions in factors and have prohibited the use of single use plastic bags in retailers

• one of the strongest forces because businesses have no choice but to comply even if it impacts their profitability otherwise they could face substantial fines or even imprisonment for individuals

pursuit of profit

• most businesses are for-profit and so one of their fundamental motives is profit maximisation

• that means businesses should adopt changes to generate more revenue and decrease their costs to earn the profit that allows them to achieve their goals

reduction of costs

• the profitability of a business is dependent on how well they manage their costs, as a consequence businesses are driven to reduce their costs:

  • adopting a strategy like JIT

  • reducing the number of employees to reduce labour costs and replacing them with technology

  • shifting production overseas or outsourcing (sourcing cheaper inputs from overseas

globalisation

• globalisation is how changes, actions and events in other parts of the world can impact a business in another part of the world and therefore can drive change:

a foreign competitor entering the domestic market (taco bell entering the aust market might require change from mcdonalds, hungry jacks etc.)

an economic recession overseas will reduce how much consumers from that country purchase from aust so businesses here might have reduce costs to stay afloat

cheaper resources overseas can promote offshoring or outsourcing

being able to open up stores overseas to access foreign consumers

technology

• a business that wants to be locally, nationally, or globally competitive must adopt the appropriate technology

• if it is slow to exploit technology a business is likely to fail

• adopting technologies can support a business to operate more effectively and efficiently, cutting costs, and improving productivity = more sales revenue = profit

innovation

• innovation is a process that occurs when something already established is improved upon

• innovation can be driven by technological advances and by globalisation

• innovation drives change because it may result in new products which can increase sales revenue or new processes which can reduce costs or improve quality

• innovation is essential for businesses survival. being able to innovate and develop new ways of thinking and doing business, will give many businesses a competitive advantage

societal attitudes

• societal attitudes refer to shared and common ideas around what is right, wrong, good, and bad

• societal attitudes are constantly changing and this affects the ways in which businesses operate

• One recent example of this is the decision by Australian supermarkets to phase out the use of single-use plastic bags. Society attitudes had shifted, and customers were concerned about their impact on the environment and so, before legislation was passed, these businesses responded to what society believed was appropriate.