unit 4 aos1 kk5,6,7

driving forces

are factors affecting the business enviroment that promote and support business change

owners as a driving force

looking for a return on their investment. Demand changes within the business

Owners act as a driving force for change because they have financial and decision-making control over the business. They are motivated to improve profitability, competitiveness, and long-term success. As a result, they often support or initiate major changes such as expansion or new technology to improve business performance.

managers as a driving force

Management consider KPIs and initiate either incremental or transitional change.

Managers act as a driving force for change because they oversee daily operations and ensure business objectives are being achieved. When managers support change, their leadership, attitude, and behaviour can influence employees and help the change be implemented successfully. They are also motivated by improving business performance, which can enhance job security and financial rewards.

employees as a driving force

employees may identify a need for improvement in working conditions or develop new ideas

Employees can act as a driving force for change because they are directly involved in daily operations and want to improve how the business performs. They are often motivated by factors such as better working conditions, wages, training, and benefits, which can lead them to support or push for change. Employees may also identify inefficiencies and suggest improvements to increase productivity within the business.

pursuit of profit as a driving force

if new profit is declining or below the benchmark it can result in the need to initative change

The pursuit of profit is a key driving force for change because all businesses aim to improve their financial performance. When market conditions change, businesses must adapt to maintain or increase revenue and profitability. As a result, the need to generate profit encourages businesses to implement changes that improve efficiency and competitiveness.

reduction costs as a driving force

net profit may decline due to high expenses therefore the business may need ot reduce these

net profit may decline due to high expenses therefore the business may The reduction of costs is a driving force for change because businesses aim to improve efficiency and eliminate unnecessary expenses. By reducing waste and improving productivity, businesses can lower operating costs and increase net profit. This may involve changes such as sourcing cheaper suppliers or relocating to reduce expenses like rent.

competitors as a driving force

businesses competing for the same market share can result in a business needing to make changes

Competitors are a driving force for change because businesses must respond to the actions of rival firms to remain competitive in the market. When competitors change prices, introduce new technology, or increase advertising, businesses are often forced to adapt. This pressure encourages businesses to implement changes to maintain or improve their market position.

legislation as a driving force

changes in legislation will initate change within their business as they need to update practices

Legislation is a driving force for change because businesses must comply with laws and regulations to avoid penalties such as fines or closure. When new laws are introduced or existing ones are amended, businesses may be forced to change their operations. As a result, legislation continuously drives businesses to adapt to ensure they remain compliant.

globalisation as a driving force

Globalisation has increased competition through communication and an unrestricted mode

Globalisation is a driving force for change because it exposes businesses to increased international competition through the removal of trade barriers and free trade. It also creates opportunities for businesses to reduce costs and achieve economies of scale by producing in different countries. As a result, businesses must adapt to global markets and changing consumer demands influenced by cultural exchange to remain competitive.

technology as a driving force

Technology is a driving force for change because it is constantly evolving and allows businesses to improve efficiency, effectiveness, and productivity. The use of innovations such as automation, robotics, AI, and computer-aided systems can reduce costs and improve operations. Businesses that fail to adopt new technologies risk losing competitiveness and may struggle to survive in the market.

innovation as a driving force

Innovation is a driving force for change because businesses must continuously improve or develop new products and processes to remain competitive. It helps businesses increase sales and market share by meeting changing customer needs and gaining a competitive advantage. As a result, constant innovation ensures businesses can adapt and respond to competitive pressures in the market.

societal attitudes as a driving force

Societal attitudes are a driving force for change because businesses must adapt to the changing beliefs, values, and expectations of society. Increased awareness through the internet means businesses that fail to respond risk losing customers, sales, and profits. As a result, businesses often introduce changes such as improved hygiene practices, healthier products, or more sustainable operations to meet evolving societal expectations.

restraining forces

are factors that resist a business change or actively try to stop it

managers as a restraining force

Managers can act as a restraining force for change when they do not support or believe in the proposed changes. They may resist change if they think it will negatively impact business performance or threaten their own position within the organisation. Because managers hold decision-making power, overcoming their resistance often requires negotiation or modifying the proposed change.

employees as a restraining force

Employees can act as a restraining force for change when they resist or oppose proposed changes within the business. They may be concerned about uncertainty, job security, or disruptions to their existing work routines and responsibilities. To overcome this resistance, managers may need to use effective communication, persuasion, or incentives to encourage employee support for the change.

legislation as a restraining force

Legislation can act as a restraining force for change because businesses must comply with laws and regulations before implementing any changes. Legal requirements may prevent a proposed change if it does not meet regulatory standards or approvals. To overcome this, businesses may need to obtain permits, licences, or modify operations to ensure compliance, although in some cases the restrictions cannot be avoided.

legislation affecting competitors

• competition and consumer act

• intellectual property laws

legislation affecting customers

• pricing displays and regulations

• product labelling

• warrantities and refunds

• privacy laws

legislation affecting employees

• pay and conditions

• workers compensation insurance

• occupational health safety

• anti bullying and harassment

• unfair dismissal laws

legislation affecting enviroment

• enviromental licenses and permits

legislation affecting suppliers

• contracts

• importing and exporting laws

Organisational inertia as a restraining force

Organisational inertia is a restraining force for change because businesses that have long-established processes and routines can find it difficult to adapt. As employees become familiar with existing structures, they may resist changes that disrupt their routine or require new ways of working. To overcome this, businesses may need to restructure operations, change leadership, or encourage a more flexible work culture that supports change.

time as a restraining force

Time can act as a restraining force for change because businesses often face strict deadlines or limited timeframes to implement change effectively. These time constraints may result from factors such as legislation, financial pressures, or competitive demands. To manage this, businesses may implement changes in stages or seek external assistance to complete the change within the required timeframe.

financial considerations as a restraining force

Financial considerations can act as a restraining force for change because implementing change often involves significant costs. These costs may include new equipment, staff training, redundancies, or restructuring the business. If a business does not have enough funds, it may need to seek financing or modify the proposed change to suit its financial situation.

porters lower cost strategy

involves a business offering customers similar or lower priced products compared to the industry average, while remaining profitable by achieving the lowest cost of operations among competitors.

3 pricicing approach of porters lower cost strategy - charge similiar prices to competitors

Experiences higher profit margins than competitors because the business has the lowest cost of operations

pricicing approach of porters lower cost strategy - charge slightly lower prices than competitors

maintains a higher profit margin than competitors by having the selling price decrease by a smaller amount than the business’s cost saving per unit

ricicing approach of porters lower cost strategy - charge much lower prices than competitors

this profit margins are outweighed by a high volume of customer sales gained from selling products at signifcantly lower prices

methods of reducing operating costs and the cost of supplies - reducing operating costs

• Producing basic, no-frills products.

• Lowering the costs of labour and operations through overseas manufacturing.

• Producing a high volume of output through automated production lines.

methods of reducing operating costs and the cost of supplies - reducing the costs of suppliers

• Obtaining discounts from suppliers by purchasing supplies in bulk.

• Securing cheaper supplies from global sourcing of inputs.

• Maintaining low inventory supplies by using Just In Time materials management strategies.

• Lowering long-term costs by sourcing high-quality supplies.

advantages of porters lower cost strategy

• attractive to cost conscious customers

• Creates barriers to entry for new competitors as it is often challenging for them to match lower prices, whilst simultaneously reducing costs of operations and still remaining profitable.

• Business operations are optimised and must remain efficient to maintain low costs of production.

disadvantages of porters lower cost strategy

• Standardised or basic products may not meet the needs of customers who have specific needs.

• Customers are not loyal to particular brands. If another business were to offer a cheaper alternative, these customers would likely switch to the new business immediately.

• Low prices may result in customer perceptions that the good or service is of lower quality.

porters differentiation strategy

involves offering customers unique services or product features that are of perceived value to customers, which can then be sold at a higher price than competitiors

A business can create a point of differentiation for its product by

• introducing new technology, such as electric cars or wireless charging for smartphones.

• innovating its original good or service, such as adding new flavours.

• improving durability, meaning the product lasts longer because of higher-quality materials or design.

advantages of porters differentiation strategy

• Customers are often loyal to the business because of unique product features or services not offered by competitors.

• Quicker sales from loyal customers when new products or services from the business are introduced.

• Can charge premium prices for products as customers cannot purchase the product elsewhere.

disadvantages of porters differentitation strategy

• Can be difficult to prevent competitors from replicating points of differentiation.

• New employees may require additional training to adapt their skills to match the business’s point of difference.

• Higher investments of time and money may be required, such as on research to develop innovative products or improve service levels of employees.

similiraties between lower cost and differentiation

• increase a business’s profitability by providing a competitive advantage

• both strategies outline how a business can gain competitve advantage in their industry

• both strategies can be applied to either goods or services

differences between lower cost and differentiation

A lower cost strategy focuses on achieving the lowest cost of operations within an industry. In contrast, differentiation aims to provide added value to a product to then sell at a premium price. However, Michael Porter emphasises that a business should only choose one strategy. This is because pursuing lower costs contradicts the higher costs required to differentiate.

A lower cost approach can successfully target cost-conscious customers if it sells products at a lower price than the industry average. By contrast, a differentiation approach sells to customers who are willing to pay premium prices. While. a differentiation approach focuses on meeting customers’ needs through added product features or services, a lower cost approach concentrates on the business's internal operating processes to achieve the lowest cost of operations in an industry.

differences between lower cost and differentiation brief

• lower cost sells at similar or lower prices than competitors, whereas differentiation sells at premium prices

• lower cost targets cost conscious customers, whereas differentiation sells at premium prices

• lower cost internal focus on operating processes whereas differentiation external focus on meeting customer needs

owners

are those that fully/partly own a business

• owners can initiate change after by increasing their investments in the business (allows for more cash flow)

managers

Managers make decisions about the future direct of the business

• managers can initatate change after recieving KPI data

employees

are the people working to meet the business objectives

• employees can drive change through motivation

competitors

are businesses in the same industry

• competition can drive a business to implement change to gain a sustainable competitive advantage

legislation

• changes to laws can force a business to implement change

e.g changes to penalty rates in some industries

pursuit of profit

is the amount remaining after revenues have been deducted from expenses

• business that are looking to increase profits, may implement changes to the business

globalisation

the process where economic boundaries are removed and businesses are begin operating on a international scale

• allows businesses to take advantage of global markets

technology

the purposeful application of information in the design production, and utilisation of goods and services, and in the organisation of human activities

• businesses may need to implement technology to remain competitve

innovation

is adopting something new or improving on what already exists

• new production processes

organisational inertia

is a businesses lack of ability to respond to pressures and embrace change