Business management: Unit4 AOS 1

Business change

the alteration of behaviours, policies, and practices of a business

Proactive approach

when a business changes to avoid future problems or take advantage of an opportunity to gain a competitive advantage

Reactive approach

is when a business undertakes change in response to a situation or crisis.

Similarities between proactive & reactive:

Both approaches are utilised by the manager to implement change within a business. Both approaches involve the business undergoing change for future benefits. Both require the support of a manager.

Differences between proactive and reactive:

Proactive change occurs when a business wants to avoid future problems from occurring and takes advantages of opportunities to gain competitive advantage. Proactive also involves a lot of low risk strats. Whereas, Reactive change occurs in response to a crisis or situation and involes a lot of high risk strategies.

Key performance indicators (KPIs)

are criteria that measure a business' efficiency and effectiveness in achieving its different objectives

Net profit figures

calculated by subtracting total expenses incurred from total business revenue earned, over a specific period of time.

Rate of productivity growth

is the change in the total output produced from a given level of inputs over time, expressed as a percentage figure.

Number of sales

the total quantity of goods and services sold by a business over a specific period of time.

Rates of staff absenteeism

are the average number of days employees are not present when scheduled to be at work, for a specific period of time.

Level of staff turnover

is the percentage of employees that leave a business over a specific period of time and must be replaced.

Number of workplace accidents

measures the amount of injuries and unsafe incidents that occur at a work location over a specific period of time.

Level of wastage

is the amount of inputs and outputs that are discarded during the production process.

Number of website hits

is the amount of customer visits that a business's online platform receives for a specific period of time.

Force Field Analysis

a theoretical model that determines if businesses should proceed with a proposed change.

Weighting

is the process of scoring and attributing a value to the driving and restraining forces.

Ranking

involves arranging the forces in order of value and determining the total score of driving and restraining forces.

Implementing a response

refers to the action that can be taken to strengthen the driving forces, reduce or eliminate the restraining forces, and/or the actual execution of the change.

Evaluating a response

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

Advantages of the force field analysis:

Can determine if the proposed change is likely to become successful.

Can save money by implementing change only where success is likely.

Can help determine sources of resistance to change helping to address them.

Disadvantages of the force field analysis:

Can be time consuming !!

Will require business resources, at a cost to the business.

Driving Forces:

are factors affecting the business environment that promote and support business change.

Owners

owners may actively seek out and support change in order to remain competitive in the business's rapidly and continuously changing environment.

Managers

Managers can act as a driving force for change when the proposed change will enhance the business's ability to meet objectives.

Employees

Employees also have a personal interest in the performance of the business as it provides them with work and an income. However, individual employees may focus their attention on their working conditions, training, wage, and benefits that the business can offer them.

Competitors

are other businesses within the same industry that sell similar goods or services to a business.

Legislation

Legislation is the laws and regulations that a business must abide by to avoid fines, suspensions or even closure. A business may be forced to change if new legislation is introduced.

Pursuit of profit

Businesses are encouraged to implement changes that improve their financial performance.

Reduction of costs

The reduction of costs can act as a driving force as businesses may implement change to improve efficiency and effectiveness, and reduce unnecessary costs that may arise in business processes.

Globalisation

is the process by which governments, businesses, and people across the globe are becoming more interconnected, allowing for increased international trade and cultural exchange.

Technology

Technology is the application of scientific knowledge to invent new devices, tools, systems, or processes.it will always act as a driving force for change. Using technology, businesses can increase the efficiency and effectiveness of their operations, cutting costs and improving overall productivity.

Innovation

is the process of altering and improving or creating new products or procedures.

Societal attitudes

Societal attitudes are the collective values, beliefs, and views of the general public. Businesses need to ensure that their operations align with societal attitudes and behaviours.

Restraining forces

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

Managers

Managers may not support a change if they do not believe the change will be beneficial for the business's performance, or if the proposed change threatens their position.

Employees

Employees may resist a business change if the outcome is uncertain, they fear they cannot adapt, it affects their job security or work routine, or they fail to see a reason for the change.

Time

The time restrictions may be due to other restraining forces, such as legislation deadlines and financial pressures, or other driving forces, such as competitors and societal attitudes.a business may have to find ways to alter the time restriction. This may mean the change is progressively implemented in stages or another business is engaged to assist with implementing the change.

Organisational inertia

is the tendency for a business to maintain established ways of operating.

Legislation

Legislation can prevent a business from implementing business change and thus act as a restraining force.

Financial considerations

If the business cannot finance the change, it will need to explore different ways of obtaining the required funds. In some cases, it may even have to alter the proposed change to suit its financial position.

Porter's 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.

Advantages of the 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.

Operations are optimised and efficient to maintain low costs of production.

disadvantages of the lower cost strategy:

Basic products may not meet the needs of all customers.

Customers are not loyal to particular brands meaning they might switch if there is a cheaper option.

Low prices may result in customer perceptions of low quality.

Porter's 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 competitors.

Advantages to porters differentiation strategy:

Customers are often loyal to the business because of unique product features.

Quicker sales from loyal customers when new products are introduced.

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

Disadvantages to porters differentiation strategy:

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

Higher investments of time and money may be required to develop innovative products.

Higher selling prices can deter cost-conscious consumers.

Similarities: Porter's differentiation and lower cost strat.

Increases a business's profitability by providing a competitive advantage.

Differences: Porter's differentiation and lower cost strat.

Porter's lower cost strategy sells at a similar or lower price compared with competitors. It targets cost-conscious customers and has mainly a internal focus on it's operating process. Whereas, the differentiation strategy, sells at premium prices which target customers which aren't price sensitive. It mainly has an external focus on meeting customer needs.