business 4
KK1 the concept of business change
business change: the adoption of any new idea or behaviour by a business. can be as a result of both internal and external pressures.
can be radical or incremental.
radical change: results in a major altercation of the business, often initiated by critical events.
incremental change: occurs more frequently but less traumatic to the business and is part of its natural development.
kk2 proactive/reactive approaches
managing change: successful managers anticipate and adjust to changing circumstances, whilst others get caught unprepared.
proactive change: where a business anticipates alteration in the business environments implements change to take advantage of this. most effective as it allows the business to plan for change and gain a competitive advantage.
reactive change: where a business is impacted by the business environments and is forced to change in order to protect its position in the market. less effective as it means the business will already have been negatively impacted by the change whilst its rivals enjoy ‘first mover advantage’.
kk5 driving forces for change
driving forces are those that initiate, encourage and support a change, pushing the business away from its state of status quo and towards a new desired state.
owners: looking for a return on their investment. in pursuit of increasing this return they can demand changes within the business.
managers: have the responsibility of operating a successful business and continually make decisions about the future direction of the business.
employees: can play a major role in the success of the change initiated and/or supporting the change. e.g., employees can develop new ideas and technologies that change the business strategy for the business. they can also place demands on the business to change conditions, policies and processes.
competitors: can initiate change given that there is an on-going battle for market share. competition can drive a business to implement change to gain a sustainable competitive advantage.
legislation: changes in legislation will initiate change within businesses as they need to update their practices and be in line with the new legislation. business need to contend with governments at the local, state and federal levels.
pursuit of profit: key objectives of business and a major driving force for business managers and their owners. not the only intiator of change. business that have met or exceeded their profit tagets will often look to implement changes to continue to increase their profit.
reduction of costs: if costs are too high, business may initiate change to reduce costs as a means of maximising profit, cutting costs with suppliers, movie locations, implement technology, reduce/reduse/recycle wastage, global strategies etc.
globalisation: resulted in businesses competing in a global market due to the improvement of communication, unrestircted trade and lower transport costs, allowing businesses of all sizes expand into new market, leading to opening of new factories, offices and retail stores across the globe by direct foreign investment.
technology: technology changing at an increasing rate can put pressure on businesses to initiate changes. if a viable new technology is not introduced into a business, it can cause them to fall behind competitors. allows a business to operate all its processes and practices more efficiently and effectively, cutting costs and improving competition.
innovation: the process that occurs when something that is already established is improved upon. could relate to new production processes, or new and improved products.
social attitudes: if businesses fail to keep up with social changes they risk falling behind or damaging their public image and brand which reduces competitiveness.
kk6 restraining forces
restraining forces are those that work against a change and aim to keep the business in its current state.
mangers: managers need to demonstrate the benefits of the change to key stakeholders, and are unlikely to do this successfully if they do not believe in these themselves, negatively influencing employees, not prioritising change tasks or ignoring them completely. managers with poor communication skills are also likely to be a restraining force given that change requires strong communication.
employees: often on of the key stakeholders that resist the change and work against it due to fear of the unknown, fear for their job security or failing to see a reason to change.
time: a business may have insufficient time for those responsible for implementing the change. this could be due to pressure from competitors or the need to act quickly as a result of a poor financial situation. it could also be the wrong time of year to implement change.
organisational inertia: this is a businesses inability to gather the momentum needed to embrace change. large business often have a significant amount of organisational inertia as they don’t adapt well to the factors from the external environment.
legislation: legislation may block or make it difficult to implement change as businesses may need to source legal advice which can become costly and cause delays.
financial considerations: costs associated with the change may not be viable or may put the business under financial pressure. financial costs may include new equipment, new facilities, redundancies, training costs, recruitment costs, or loss of income due to impact of the change. a cost-benefit analysis is import to assess whether the change is worthwhile.
kk3 key performance indicators
a kpi is a specific criteria used to measure how a business is performing in a certain area.
data gathered from kpis inform managers about the effectiveness and efficiency of different areas of the business allowing for more informed decisions.
percentage of market share: a businesses portion of the total sales in an industry for a particular good or service. if the percentage of market share increases, it means that it is taking market share away from competing businesses.
net profit: the amount of money left over after expenses have been deducted from revenue earned. determines a businesses long term success. businesses are able to have high sales but negative profit is they are pricing too low.
rate of productivity growth: the amount of outputs produced compared to the amount of inputs used, expressed as a percentage increase overtime, measuring the efficiency of a businesses production process.
number of sales: refers to the quantity of products sold over a given period of time. provides managers with information on which to make decisions and implement changes.
staff absenteeism: the rate in which employees fail to attend work on a given day.
level of staff turnover: a measure of the rate at which employees leave the business and must be replaced.
level of wastage: refers to the amount of products or materials that are discarded by the business during the production process.
number of customer complaints: refers to the amount of consumers that are unhappy with the business and/or its products and have expressed their concerns to the business.
number of website hits: refers to the amount of requests to download a file on a particular website.
number of workplace accidents: the amount of events that result in a personal injury or property damage at a business over a given period of time. measure of workplace safety.
kk4 force field analysis theory (lewin)
ffat outlines a process for determining the most significant forces that will drive and restrain a proposed change.
steps:
define the change
identify the driving and restraining forces
analyse the forces, provide a weighting and ranking on the perceived strength of each force.
develop an action plan and implement a response, tweaking restraints and strengthening driving forces.
evaluate the response.
BENEFITS:
business can better predict whether or not the change will be successful
helps determine whether the change is worth pursuing
if skills are restraining change, training can be organsised
identify stakeholders that may support the change and those who may resist.
kk7 porters generic strategies
outlines how a business can pursue a competitive advantage in the marketplace by implementing one of the generic strategies including lower cost and differentiation.
lower cost strategy: allows the business to have the lowest production costs in the industry.
can be achieved by:
achieving economies of scale - operating on a large scale to reduce unit costs.
using assets efficiently - minimising idle stock on shelves through just in time.
lower costs of operating - source supplies from cheaper supplies, minimise wage costs.
implementing technology - introduce an automated production line or self-service facilities
differentiation strategy: a business develops a competitive advantage by having a good or service which is unique, allowing the business to charge a premium price.
can be achieved by:
marketing
patents
high quality materials
relationships
innovations
training
distributors