Business Management Unit 4 AOS 1: Business Change

Vocabulary-style flashcards covering key concepts of Business Change, including KPIs, Lewin's Force Field Analysis, and Porter's Generic Strategies.

Business Change

The process of making alterations by adopting a new idea or behaviour.

Proactive Approach

When a business acts in advance to avoid future problems or gain a competitive advantage.

Reactive Approach

When a business undertakes change in response to a situation or crisis.

Key Performance Indicators (KPIs)

The criteria used to measure the success of a business's ability to achieve business objectives.

Types of KPIs (10)

Percentage of market share

Net profit figures

Rate of productivity growth

Number of sales

Rates of staff absenteeism

Level of staff turnover

Level of wastage

Number of customer complaints

Number of website hits

Number of workplace accidents

Percentage of market share

The proportion of sales a business has compared to the total sales in the market, expressed as a percentage.

Net profit figures

The amount of money left over after all expenses have been deducted from revenue earned.

Rate of productivity growth

The amount of outputs produced compared to the amount of inputs used and the rate in which it increases over time.

Number of sales

The amount of goods or services sold in a specified period of time.

Rates of staff absenteeism

The number of employees that do not turn up to work when expected to be there.

Level of staff turnover

The rate in which people leave the business and need to be replaced.

Level of wastage

The amount of resources and finished goods that are underutilised or discarded during the production process.

Number of customer complaints

The amount of people that are dissatisfied with the business and/or its products and have notified the business of their dissatisfaction.

Number of website hits

Measures the amount of times individual visit a business's website.

Number of workplace accidents

The amount of unplanned or uncontrolled events that result in personal injury or property damage at a business.

Force Field Analysis

A tool created by Kurt Lewin to compare forces for and against a particular change so that an informed decision can be made.

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 stop it.

Principles of Lewin's Force Field Analysis

- Weighting forces

- Ranking

- Implementing a response

- Evaluating the Response

Weighting

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

Ranking

Using the scores given in the weighting process to order each force from most to least influential in terms of its impact on the proposed change.

Implementing a Response

Develop an action plan to reduce the strength of the retraining forces and increase the strength of driving forces

Evaluating the response

The change team should evaluate the work to determine if it has been successful in altering the strength of any of the forces

Advantages of Force Field Analysis

- Provides managers a clear indication of forces for and against the change

- Helps determine if the change is worth pursuing

Disadvantages of Force Field Analysis

- Both identifying forces and weighting the forces is subjective

- Strong focus on the current state, with a lack of focus on the future state

Owners (as a driving force)

As they pursue profits they can initiate changes within the business

Managers (as a driving force)

Managers can intiate changes as they work towards the vision of the business

Employees (as a driving force)

Employees can instigate change in a business by driving improvements in processes product features

Competitors (as a driving force)

The competitive nature of a business can intitiate change in a business as they compete for customers

Legislation (as a driving force)

Laws can be brought in that can force business's to implement changes to ensure they comply with the changes

Pursuit of profit (as a driving force)

Implementing changes that will improve profits can also be a great support for the change

Reduction of costs (as a driving force)

change may be intiated as a result of rising costs to reduce costs further

Globalisation (as a driving force)

Can drive change in a business so they remain competitive

Technology (as a driving force)

Can drive change in a business as it can improve proccesses, communication, products, data analysis and efficiency

Innovation (as a driving force)

can drive change as it helps reduce costs by improve proccesses and automates tasks

Societal Attitudes (as a driving force)

Managers (as a restraining force)

Poor decision-making, indecisiveness, or a manager's lack of skill in overseeing change can cause employees to lose confidence in management and resist the change.

Why managers resist change

Employees (as a restraining force)

Employees may resist change because they fear job losses, mistrust a new corporate culture or worry they can't adapt to new procedures without proper training.

Why employees resist change

Fear of the unknown; fear of losing their job; need for retraining; changes to work routines, concern about reduced job security.

Legislation (as a restraining force)

Laws and regulations that a business must comply with can restrict operational practices and restrain change.

Why legislation restrains change

Businesses must comply with Occupational Health and Safety (OHS) laws, National Employment Standards, environmental laws, consumer protection laws, competition laws, and privacy laws.

Organisational inertia (as a restraining force)

This is a business's inability or unwillingness to make internal changes in response to significant external changes, often because managers and employees are comfortable with the status quo.

Why organisational inertia resists change

Long-standing traditions; comfortable routines; existing systems and procedures; employees prefer the status quo.

Time (as a restraining force)

A restraining force where pressure for change is ongoing but businesses may not have enough time to plan, implement, or adjust to change effectively, or the timing may be poor.

Why time restrains change

Large changes take time to implement; competitors may force rapid responses; delays can make change outdated before completion.

Financial considerations (as a restraining force)

The cost of implementing change can restrain change if a business lacks sufficient funds or if costs outweigh expected benefits.

Why finance restrains change

Businesses may lack available funds, be unable to borrow, face high interest rates, or question whether the benefits will outweigh the costs.

Porter's Generic Strategies

A model proposed by Michael Porter in 1985 stating that businesses can gain a competitive advantage by adopting either a lower cost or a differentiation strategy but should only pursue one at a time.

Lower cost strategy

A strategy where a business aims to become the lowest-cost producer in its industry while remaining profitable, allowing it to sell products at similar or lower prices than competitors.

When is a lower cost strategy viable?

In industries with many cost-conscious customers who have little brand loyalty and will buy from the cheapest supplier. If multiple competitors chase lowest cost, rivalry can reduce the whole industry's profitability.

Strategies to achieve lower cost — reducing costs

Reducing direct and indirect costs, such as minimising wage costs, reducing interest costs (e.g. refinancing), or sourcing cheaper supplies/utilities and using minimal packaging.

Differentiation strategy

A strategy where a business offers customers unique features, products, or services perceived as valuable, allowing it to sell at a premium price.

When is a differentiation strategy suitable?

In markets where customers are not price sensitive and specific needs are unmet or under-served, or in highly competitive markets where a business needs to stand out — provided it has unique resources/capabilities competitors can't easily copy.

Creating a point of differentiation

Introducing new technology (e.g. electric cars); innovating the product (e.g. new flavours); improving durability; advertising a brand image aligned with customer values; or niche marketing to a specific market segment.