Business Management Unit 4 Sac 1

Reviewing Performance - a need change

Business Change

Refers transitioning individual employees, working teams, functions or the whole business to a new state of operation.

Business Change (Feature)

Businesses are constantly evolving and adapting to improve their performance. (can be reactive or proactive)

Business Change (Example)

Qantas Group announced a strategic restructure that includes the closure of its Asian budget airline (focus on Aus market)

Proactive Change

Change occurs when a business acts in advance to avoid future problems, or take an opportunity to gain a competitive advantage.

Proactive Change (example)

Qantas group plans to strengthen their focus on Australian and New Zealand markets to help increase market share (gain advantage) + redeployed aircrafts from Jetstar Asia into this market

Reactive Change

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

Reactive Change (example)

Jetstar Asia faced $33 million profit loss for the financial year, Jetstar Asia only been profitable in six of its 20 years, thus they simplified and restructured their operation.

Proactive Change (Benefits)

• helps mitigate risks + prevent disruptions

• better decision-making through long term considerations

• allows business to lead trends = gain competitive advantage

Proactive Change (Limitations)

• predictions may be inaccurate = unnecessary + inefficient change

• requires increase in time, effort + resources

• resources = removed from critical areas

Reactive Change (Benefits)

• business = gain insights into potential risks + vunerabilities

• allows business to concerntrate on the most pressing issues

• business = address urgent issues quickly

Reactive Change (Limitations)

• Little time available to plan for change = not address root of issue

• Can create a stressful work environment = increase staff turnover

• Can strain resources = lead to loss of profits

Proactive vs. Reactive (similarities)

• both involve modification to operations + aim to address challenges

• both impact the organisations structure + aim to improve it

• both involve adaptation to a new circumstances

Proactive vs. Reactive (differences)

Proactive = planned before the need arises/avoids future problems

Reactive = in response to immediant issues + crisis

Proactive = more planned and coordinated + less pressurized change

Reactive = more spontaneous, urgent, pressurised

Key Performance Indictator (KPI)

A type of measurement that helps a business understand how they are performing in a certain area.

Key Performance Indictator (Features)

• must be well-defined and quantifiable

• must be calculated properly and consistently

• give a clear insight into the area of the business you are concerned with

Key Performance Indicators (examples)

• Percentage of market share

• Net profit

• Rate of productivity growth

• Number of sales

• Number of customer complaints

• Rates of staff absenteeism

• Level of staff turnover

• Number of workplace accidents

• Level of wastage

• Number of website hits

Percentage of market share

Represents the proportion of an industry or market’s total sales that is earned by a particular company over a specified time period.

Percentage of market share (Feature)

Is calculated by taking the company’s sales over the period and dividing it by the total sales in the industry over the same period.

Percentage of market share (indicates: Falling sales = customer unhappy with quality)

Solve:

• introduce quality strategies (quality control)

• invest in staff training

Percentage of market share (indicates: prices too high, need to lower production costs)

• saves money through global manufacture

• global sourcing of inputs

• reduce cost through technology

Percentage of market share (example)

Jetstar Asia’s market share in Singapore shrunk (27% 2010) (below 20% 2018) (approx. 15% 2025), illustrates Jetstar Asia’s inability to gain a competitive advantage.

Net profit

Is a company’s total revenue, excluding its total expenses, this showing what the company’s learnt/lost in a given period of time.

Net profit (Feature)

Total revenue - Total expense = Net profit

Net profit (indicates: high cost b/c customer = dissatisfied, thus low sales)

• introduce quality strategies

• increase staff training

• improve staff motivation

Net profit (indicates: high cost = less profitable)

• global manufacturing (save labour costs)

• implement tech strategies —> productivity

• reduce wastage (recycle, reuse, Lean Management)

Net profit (example)

Jetstar Asia was projected to have a $35 million loss for the financial year prior to the closure decision.

Rate of productivity growth

Is the increase in outputs produced from a given level of inputs over time.

Rate of productivity growth (Feature)

(New productivity - old productivity rate) / (old productivity rate) x 100

Rate of productivity growth (indicates: low productivity = failing machinery to produce quickly)

• Automated production Lines

• Quality Assurance

Rate of productivity growth (indicates: staff = failing to produce quickly)

• increase staff motivation

• increase staff training (on the job or off the job)

Rate of productivity growth (indicates: log jam in inputs)

• Just in time

Number of Sales

Refers to the measure of the total amount of goods or services and in a given reporting period.

Number of Sales (Feature)

No. of sales indicate popularity but not necessarily financial improvement.

Number of Sales (indicates: less popularity, product/service not meeting customer needs)

• impove quality in production (quality control)

• invest in training

Number of Sales (indicates: price too high)

• Lean Management/Waste minimisation strategies —> reduce cost of production = can lower prices

Number of Sales (indicates: customers are not aware of the product)

• improve marketing to customers

Number of Sales (indicates: customers are not aware of the product)

• improve marketing to customers

Number of Sales (examples)

For Qantas Group (Jetstar Aisia) not enough to overcome costs + competition.

Number of customer complaints

Is the number of customers who notified the business of their dissatisfied over a specific period of time.

Number of customer complaints (Feature)

No. complaints can be valuable when comparing between one period and another.

Number of customer complaints (indicates: quality of product is declining)

• introduce quality management strategies

• increase investment in technology

• increase staff staff training

• improve staff motivation

Number of customer complaints (indicates: customer service is declining)

• increase staff training

• improve staff motivation

Rate 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.

Rate of Staff absenteeism (Feature)

(Total number of days all staff are absent)/(total number of staff)

Rate of Staff absenteeism (indicates: Absenteeism increasing = job dissatisfaction)

• Invest into worker motivation, performance related pay or training

• Provide support + counselling for staff

• Change management styles

• Redeploy resources

Level of Staff turnover

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

Level of Staff turnover (Feature)

(Total number of staff leaving over a period of time) / (Total number of staff) x 100

Level of Staff turnover (indicates: more staff are leaving b/c job dissatisfaction)

• Invest in motivation strategies (performance related pay/training)

• Provide support + counselling to staff

• Change management styles

• Redeploy resources to allow promotion opportunities

Level of Staff turnover (indicates: staff being made redundant/dismissed/retiring)

• help with transition consideration

Number of workplace accidents

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

Number of workplace accidents (Feature)

Total number of indicents reflect on unsafe procedures or practices. All measures should be taken to reduce this.

Number of workplace accidents (indicates: Poor quality safety equipment/training/procedures)

• Investment in staff training

• Invest in technology

Level of Wastage

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

Level of Wastage (Feature)

higher wastage affects production costs + negatively impacts environment)

Level of Wastage (indicates: storage is insufficient or inefficient)

• Quality Assurance and Quality Control

• Total Quality Management

Level of Wastage (indicates: production process is broken or inefficient)

• invest in tech (robotics) + training —> improves accuracy

• implement lean production strategies

Number of Website hits

Is the amount of visits that a business’s online platform receives for a specific period of time.

Number of Website hits (Feature)

Serves as sign of customer interest + future sales

Number of Website hits (indicates: lack of promotion, engagement, reputation (poor), product quality (poor)

• Quality Strategies

• Tech Strategies (online services)

• Improve promotion + marketing

Lewin’s Force Field Analysis

Is a theoretical model positing that businesses usually exist in a state of equilibrium, where some forces acting on a business will drive change, while others will restrain change.

Driving Forces

Factors affecting the business environment that promote and support business change.

Restraining Forces

Factors that resist a business change or actively try to prevent it.

4 steps to determine whether they should proceed with change:

1. Weighting

2. Ranking

3. Implementing

4. Evaluating

Weighting

Is the process of giving each force a score according to the degree it has on the plan. (how much tension needs to be put on each force)

Ranking

Involves using the score given in the weighting process to order each force from most to least influential in terms of its impact on the proposed change (allows the business to target specific forces needed to achieve change)

Implementing a response

The business decides whether or not to move forward with implementing the change, whether the forces against outweigh the forces for. (consider strategies to strengthen the driving forces/wearing the restraining forces)

Evaluating the response

The business considers whether the goal objective has been achieved and if not, what can now be done to further strengthen driving focres/weaken restraining forces.

Driving Forces (example)

• Owners

• Managers

• Employees

• Pursuit of profit

• Reduction of costs

• Competitors

• Legislation

• Globalisation

• Technology

• Innovation

• Societal attitudes

Driving Force: Owners

Are interested in the success of the business from a financial and personal reputation position (want to improve return on investment)

Driving Force: Owners (how they drive change)

• Will drive change to achieve capital gains/dividends

• Driven to achieve profits/social cause

• May want achieve a increase return on investment

Driving Force: Owners (example)

Owners (shareholders) of Jetstar Asia (Qantas) pushed for its closure. (led to a 5% increase in share price)

Driving Force: Managers

Are interested in the success of the business form a job security, financial and personal reputation position.

Driving Force: Managers (how they drive change)

• Job security —> contract of employment to initiate change

• Financial Benefit —> financial incentive to achieve success in change

• Personal Reputation —> improve resume or future position

Driving Force: Managers (example)

Qantas Group’s CEOs drived capital allocation and strengthening the operation through change.

Driving Force: Employees

Are interested in the success of the business from a job security, financial, career development and a personal reputation position

Driving Force: Employees (how they drive change)

• may be a driving force in seeking better terms + conditions of employment

• may drive change suggestion to achieve promotional opportunities

Driving Force: Pursuit of Profit

Max profit margins is a business objective that can act as a driving force for change (can come from owners/shareholders)

Driving Force: Pursuit of Profit (how they drive change)

• PLC + Pty Ltd, string interest in improving return on investment

• Social enterprises, need profit to allocate to a social cause

• Gov enterprises need profit to achieve society betterment

Driving Force: Reducation of costs

Focuses on reducing costs to create larger profit margin (achieved through: eliminating expenses in production operation Management, Lean Managenet. Human resource management)

Driving Force: Reducation of costs (example)

Qantas Groups decision to close Jetstar Asia, this helped reduce supplier costs and by removing a part of the business that is operating at a significant loss it helps Qantas achieve increase profits moving forward. (supplier costs had increased by up to 200%)

Driving Force: Competitors

They embark on change themselves, they may gain a competitive advantage and steal market share from the business. (pursuit of increasing market share can be a major driving force)

Driving Force: Competitors (example)

Intense competition from low-cost Asian Carriers (from Scoot + AirAsia)

Driving Force: Legislation

Are the laws and legal regulations that businesses must follow therefore legislation is a compulsory driving force for change.

Driving Force: Legislation (example)

Min wage, anti-discrimination.

Driving Force: Gobalisation

The increase in global trade, communication and transportation on a global scale creates drivers for change.

Driving Force: Gobalisation (how they drive change)

• expose global competitors (opportunities)

—> manufacturing overseas = reduce cost, increase quality

Driving Force: Technology

Is constantly progressing and has facilitated the exchange of goods and services, resources and ideas, irrespective of geographic location. (robotics, automated production lines, artificial intelligence)

Driving Force: Innovation

Is the process of altering, improving, or creating new products or procedures (helps gain a competitive advantage, fulfill a social or market need)

Driving Force: Societal attitudes

Are the collective values, beliefs and views if the general public. (changing needs from their consumers, employees, and general society)

Driving Force: Societal attitudes (example)

Grill’d came up with plant-based burgers, cater to vegans.

Restraining Forces (examples)

• Managers

• Employees

• Time

• Organisational Inertia

• Legislation

• Financial considerations

Restraining Force: Managers

They can inhibit the chances of its success; by negatively influencing employees, not prioritising the change tasks/ignoring them.

Restraining Force: Managers (this happens if)

• Manager is not convinced by the change

• Very comfortable in their current working conditions

• Fear the change may threaten their postion

Restraining Force: Employees

They can be a major restraining force as it can result in disputes, strikes, and industrial action (need to be dealt with communication + support)

Restraining Force: Employees (this happens if)

• fear of the unknown

• fear for their job security

• fail to see a reason to change

Restraining Force: Employees (example)

Jetstar Asia’s closure created concerns for employees around job security, morale and the broader reputational impact of Qantas (employees = fight for their jobs) (reported 500 jobs lost in singapore-based workforce)

Restraining Force: Time

Change takes time, and having insufficient time to work through the change can cause restraint/resistance.

Restraining Force: Time (this happens if)

• Deadlines make it hard to achieve the change

• Takes time to change operations + procedures

• Good forecasting/being proactive can prevent this issue

Restraining Force: Time (example)

When Jetstar Asia closed there was a significant time pressure to complete all required tasks.

Restraining Force: Organisational Inertia

Is the for a business to maintain established ways of operation.