U4 AOS1 - business

Reactive definition

To respond to change as it becomes necessary to do so.

Proactive definition

To anticipate and initiate change rather than simply react to events.

Financial key performance indicators

Net profit figures, number of sales, and percentage of market share.

Definition of net profit figures

Measures the earning performance of the organisation, calculated as revenues minus expenses.

Definition of number of sales

Measures the dollar value of products sold over a period of time.

Definition of percentage of market share

The proportion of total sales in an industry that a business has, expressed as a percentage.

Non-financial performance indicators

Level of staff turnover, rates of staff absenteeism, number of customer complaints, level of wastage, number of workplace accidents, rate of productivity growth, and number of website hits.

Definition of level of staff turnover

Measures the number of staff who are leaving the organisation and are replaced.

Definition of staff absenteeism

Measures the percentage of days in which a rostered employee does not show up for work.

Definition of number of customer complaints

Indicates whether or not customers are satisfied with the performance of the organisation.

Definition of level of wastage

Measures the amount of waste created by the production process.

Definition of number of workplace accidents

Indicates how safe the workplace is for employees by measuring the number of incidents over a period of time.

Definition of rate of productivity growth

Measures the percentage change in the ratio of outputs to inputs in one year compared to previous years.

Definition of number of website hits

Measures the number of people who access a business website over a given period of time.

Driving forces definition

Factors that initiate, encourage, and support change.

Restraining forces definition

Factors that resist and work against change.

Lewin's force field analysis definition

In order for change to occur, driving forces must outweigh restraining forces.

Steps of force field analysis

1. Identifying. 2. Weighting. 3. Ranking. 4. Implementing a response: the manager implements a response to strengthen driving forces or attempt to weaken restraining forces. 5. Evaluating a response: after implementation, ongoing evaluation occurs to determine the relative strength of the driving forces compared to restraining forces and determine whether change will go ahead.

Driving forces for change (12)

Owners, innovation, employees, managers, customers, competitors, globalisation, legislation, pursuit of profit, reduction of cost, societal attitudes, and technological forces.

Restraining forces for change (6)

Financial considerations, time, management, employees, organisational inertia, and legislation.

Low cost

Involves a business trying to become the lowest-cost producer in the market.

Advantages and disadvantages of low cost

Advantages: increased market share as businesses sell larger volumes due to low prices

Differentiation

A business will attempt to change its product in some way so that it is unique and thus able to gain a competitive edge over other businesses. This means that the business offers a product superior to competitors regarding quality.

Advantages and disadvantages of differentiation

Advantages: allows business to charge premium prices due to unique features

porters generic strategies

low cost

differentiation