BusMan Unit 4 AOS 1

Reviewing Performance - The need for change

Business Change

Altercation of behaviours, policies and practices of business

• Requires strong leadership and management skills

Proactive Approach

Business changes to avoid future problems or take advantage to gain competitive advantage

• Fulfilling gap in market

• Recognising change in trends

Reactive Approach

Business undertakes change in response to situation or crisis 

• Attempt to avoid

Key Performance Indicator

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

Percentage of Market Share

The business’s share of the total industry sales for a particular good or service

Net Profit features

Measure of company profits once expenses and taxes have been deducted from revenue

Rate of Productivity Growth

Change in total output produced from a given level of inputs over time = business using the resources more effectively

Number of sales

Amount of goods or services that are sold over a period of time

• Determine if its able to achieve financial objectives

Rate of staff absenteeism

Number of staff who do not show up to work when scheduled

Level of staff turnover

Number of employees (or rate) leaving a business over a specific period of time and need to be replaced

Level of wastage

Amount of inputs and outputs that are discarded during production process

Number of customer complaints

Amount of customers who contact the business to express disappointment with the business

Number of website hits

Amount of customer visits that a business online platform receives for a specific period of time

Number of workplace accidents

Amount of injuries that occur at work over a specific period of time

Force field analysis

The process of determining which forces drive and which forces resist proposed change

• Giving weight to current forces

Advantages of force field analysis

• Determine whether the change is worth taking

• Allow a timeline to be developed and requirements to be identified

• Visual diagram leads to increased communication

Disadvantages of force field analysis

• Weighting of the forces is subjective

• Timelines can be subjective and not consider unexpected events

• Some forces may not be clearly identifiable at the time 

Force field analysis key principles

1. Give weighting to current driving and restraining forces
2. Rank the top restraining and driving forces to eliminate or strengthen them
3. List actions required to implement a response
4. Evaluate the response

Weighting (FFA)

Scoring and attributing a value to the driving and restraining force
level of impact on the business

Ranking (FFA)

Arranging the forces in order of value and determining the total score of driving and restraining forces

• help determine which driving forces can be strengthened and which restraining forces can be removed or minimised

Implementing a response (FFA)

Action that can be taken to strengthen the driving forces, reduce or eliminating the restraining forces, and/or the actual execution of the change

Evaluating the response (FFA)

Comparing the actual change to the anticipated change and determining whether further action needs to be taken.

Driving forces

Factors affecting the business environment that promote and support business change → factors that naturally push a change to occur

Owners (Driving)

Has a vested interest in the ability of a business to meet objectives and continue to adapt

• Driving if they believe it’ll be beneficial to the business

Managers (Driving)

Enables business performance is optimised and objectives are being achieved

• driving force when the proposed change will enhance the business' ability to meet objectives → usually have same viewpoint as owner

Employees (Driving)

responsible for achieving business objectives

• driving force if change will improve their work environment

Pursuit of profit (Driving)

Main objective of a business is to make a profit

• improve financial performance

Reduction of costs (Driving)

Increasing costs = negative impact on profit = financial consequences

Competitors (Driving)

Business must respond appropriately to changes made by competitors

Legislation (Driving)

Business must comply with laws and regulations

• forced to change → abide by the law

Globalisation (Driving)

The process by which the globe is becoming more interconnected, allowing for increased international trade and cultural exchange

• drives all business' to change so that they remain viable and competitive

Technology (Driving)

Fail to adapt to technology = impacts ability to compete and survive

Innovation (Driving)

Process that occur when something already established is improved upon

• pressure from competitors = business be innovative to increase sales and market share

Societal Attitude (Driving)

Collective values, beliefs, and views of the general public

• business align operations with societal attitudes and behaviours

Restraining Forces

Factors that actively try to stop business

Managers (Restraing)

Unsupportive if they believe the change will not be beneficial to the business’ performance or threatened by the change

Employees (Restraining)

Restraining force if outcome is uncertain, they fear they cannot adapt or if it impacts job security of work routine

Time (Restraining)

Time restrictions, deadlines, etc

Organisational Interia (Restraining)

Owners/managers resistant to change due to familiarity in structures already in place → have to change leadership to promote new directions

Financial Considerations (Restraining)

Changes incur costs

Legislation (Restraining)

Restraining force when changes places restrictions or limits on business practices or procedures

Porters generic strategies

Can help determine the strategic direction required for business change to gain competitive advantage

• Lower cost

• differentiation

Lower cost (PGS)

Offering similar or lower-prices products compared to the industry average, while remaining profitable by achieving the lower cost of operations amongst competitors

Lower cost advantages

• Prevent competitors improving their market share

• Cheaper sales = Increased sales = Increased profit

• Cheaper operations = save money

Lower cost disadvantages

• Poor quality = poor reputation

• Difficult to differentiate in the future if cost advantage disappears

• Vulnerable to unexpected expenses

Methods for lower cost

• Reduce operating costs

• Reduce cost of suppliers

Differentiation (PGS)

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

Differentiation Advantages

• Develop customer loyalty

• Increased revenue

• Increased market share

Differentiation Disadvantages

• High initial costs

• Changing customer preferences leading to hard to appeal

• High cost can deter conscious customers

Methods for differentation

• Multiple branding (Coke owns fanta)

• High quality products

• Innovation

• Product aligning with values

• Niche marketing