U4 - AoS1 (BM)

Business change - Any alteration to a business and/or its work environment.

• - Business change is the adoption of a new idea or behaviour by a business
• - Change occurs because of pressures placed on businesses to make adjustments to its departments, operations, employees jobs, behaviours, management styles or corporate culture.
• - Many employees will resist change because they may feel a loss of personal identity, be afraid of failing or feel disoriented about where change is leading them.
• - Management needs to implement strategies to support employees and ensure that resistance to change is minimised.

• Proactive Change Management:
• - is to initiate change by foreseeing pressures in the dynamic environment and implementing change to take advantage.

• - Allows the business to gain a competitive advantage
• - Allows the business to be prepared when the change occurs
• - Using key performance indicators (KPI) results to identify possible problems before they occur

• Reactive Change Management:
• - where the business is impacted by pressures from the business environments and then responds as a result

• - Being faced with a crisis
• - Observing competitors and either copying what they do or implement new strategies
• - May causing a loss in productivity or sales
• - Can cause the business a loss of time to recover from the change

Key performance indicators (KPIs) are measures or a set of data that allows a business to determine whether its meeting its business objectives.

• - KPIs measure the effectiveness and efficiency, which help in understanding and improving business performance.
• - Analysing KPI data helps managers make informed decisions

• - KPIs provide a comprehensive overview of a business's performance and help managers make informed decisions for the future, as well as analyse the decisions and strategies that have been made and implemented in the past, and set future objectives.
• - Each KPI gives a different view into the business's overall health and performance, and they collectively provide a comprehensive look into different aspects of the business.
• - Can pinpoint areas for improvement, and recognise areas where the business is performing well.

• - Managers analyse KPIs to determine whether the business has been successful in relation to their objectives.
• - Businesses should use a range of KPIs to ensure that they can make sound judgements about business performance.
• - KPIs should be compared to other businesses results or compared to budgets or targets set by the business.

• Why Evaluate Business Performance?
• - Businesses will make major strategic decisions using the information they have collated from KPIs.
• - Therefore, the results of KPIs are often the evidence used to help a business identify that they need to change.
• - E.g. low profits encourage a business to make changes.

• Percentage of Market Share:
• - A business’s proportion of the total sales in an industry for a particular good or service, expressed as a percentage.
• --- increase in market share = greater sales, increased net profit.

• Net Profit Figures:
• - The amount remaining after all operating expenses have been deducted from the businesses total revenue.
• - Indicates the financial health of the business
• - More sales = high amount of revenue, therefore higher net profit

• Rate of Productivity Growth:
• - Measures the rate of change of a business’s ability to transform inputs in outputs.
• - Measures the growth rate of the efficiency of the business over time
• - Higher productivity growth rate implies business is continuously improving its processes and able to use fewer resources to produce its outputs. Can result in lower costs and faster production times

• Number of Sales:
• - The total quantity of products purchased by customers.
• --- greater sales = greater revenue, therefore greater net profit (revenue-expenses).
• - Higher sales does NOT always equal higher profit. Especially if the costs of the business is not controlled. The revenue from sales must offset the costs of the expenses to create profit.

• Rate of Staff Absenteeism:
• - A percentage indicating the number of workdays lost due to unscheduled staff absence from work, especially without good reason.
• --- high level of absenteeism = (potentially): poor corporate culture, poor working conditions, low employee morale and job satisfaction, inadequate work-life balance, health and safety issues, etc.

• Level of Staff Turnover:
• - The number of employees that leave a business during a set period and need to be replaced.
• --- low level = good, high level = bad
• --- low = (potentially) high employee satisfaction, positive corporate culture, healthy work-life balance, job security, etc.
• - Can be costly for a business, as there is expenses related to the recruitment and providing training and development opportunities
• - Can also impact productivity and morale amongst remaining staff

• Level of Wastage:
• - The amount of excess and unused inputs that have not been converted into outputs.
• - Reducing wastages can decrease costs as businesses pay for resources. If resources are going to waste, then money is essentially going to waste, where a decrease in wastage levels can decrease costs
• - Can also improve efficiency, and lessen the business's environmental impact
• - high wastage can cause managers to initiate change to improve factors of the business (e.g., investing in tech, process efficiency, quality control, etc.).

• Number of Customer Complaints:
• - The amount of customers who express their dissatisfaction of a product provided by a business.
• - Important to be measured, as it can identify recurring problems in the processes or products which need to be addressed.
• - Can provide insights into customer expectations and experiences.
• - Decrease in complaints can be an indication of improved quality or service delivery.

• Number of Website Hits:
• - The amount of customer visits that a business’s online platform receives for a specific period of time
• - High number of website hits can indicate successful digital marketing efforts, popular products/services the business has, or effective search engine optimisation.
• - Can provide insights into customer behaviours on the website as well as preferences, and potential areas for improvement on the website.

• Number of Workplace Accidents:
• - The amount of incidents in the working environment that have negatively impacted the health and safety of employees.
• --- lots of accidents = (potentially) poor health and safety, issues with safety protocols or procedures, insufficient employee training, or need to improve the equipment. issues may arise

Force field analysis looks at factors that are either driving movement towards a change (driving forces) or blocking movement towards a change (restraining forces), to determine if the business should go ahead with the proposed change.

- Driving forces are those factors affecting a situation that are pushing in a particular direction and supporting the proposed change.

- Restraining forces are factors that act against the driving force to resist the change e.g. employees, time, financial considerations.

• Principles:
• 1. Weighting: the process of scoring and attributing a value to the driving and restraining forces to represent its strength.

2. Ranking: involves arranging the forces in order of value and determining the total score of driving and restraining forces. Helps in understanding the key drivers and resistors.

3. Implementing a response (in an action plan): 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.

4. Evaluating the response: determining whether or not the change has been successfully implemented

• Factors for successful change:
• - When driving forces are more dominant than restraining forces the change will be successful.
• --- D>R = change

• - If driving force meets restraining force at a similar level, the change is unlikely to be successful.
• - Maintains the ‘status quo’ (current situation)
• --- D = R no change'

• - If restraining force is more powerful than driving force, it is unlikely the change will be successful.
• - Maintains the ‘status quo’
• --- D<R = no change

• Advantages:
• - Helps determine if change is worth pursuing
• - Allows managers to develop ways of reducing restraining forces
• - Allows actions and timelines to be developed
• - Identifies stakeholders that will likely be supportive of change and those that may resist it

• Disadvantages:
• - Participation from every member is required to get a complete picture. This can be difficult to achieve.
• - Both identifying and weighting forces are subjective. + additional forces that were not identified beforehand may arise during change, making it difficult to deal with
• - Thorough analysis requires time, effort and resources.
• - May cause division between employees for those who support change and those who are against it.

Driving forces are those that encourage, foster and initiate change. A business manager desiring to bring about organisational change must promote these forces and minimise restraining forces in order to be successful.

• Owners - A person that establishes and operates a business.
• - Can act as a driving force for change if they believe change will be beneficial to future business performance
• - May actively seek out and support change to remain competitive in the business’s rapidly and continuously changing environment
• - Also have an interest in the financial performance of the business, given they receive income from its operations
•  
• Managers - A person responsible for controlling and dealing with a group of staff.  
• - Have to drive change by ensuring the changes are implemented. Must be prepared for change and ensure that management across the business are clear about the changes required.
• - Need to be willing to share ideas and expertise with others to increase capacity for support for change.
• - If there is a positive relationship between employees and management, it is more likely to allow change to be discussed and successfully implemented.
• - A consultative or participative management style should be used.

• Employees - A person working for a business for wages or a salary. 
• - Employees in an organisation with a positive corporate culture are more likely to be involved in change, and resistance less likely.
• - If a participative or consultative management style is used, this will encourage employees to support the change as they are more involved in the process

• Competitors - A business rival in the same market for products or services.
• - Knowing how rivals are conducting their business is crucial, as it enables organisations to make modifications to existing business activities and to plan new ones to gain a competitive advantage.

• Legislation - The process of making laws. 
• - New laws can act as a driving force for change for businesses.
• - Eg. Anti-discrimination laws and equal opportunity laws can lead to changes in policies and procedures.
• - Permits, licenses and parking restrictions can impact on the operations of the business. 

• Pursuit of profit - The difference between revenue and expenses. 
• - Successful businesses will implement changes in effort to increase sales, market share and profit.
• - Large businesses are under pressure to increase profit from shareholders.
• - Strategies to increase profit: improve quality of products/ services, cut back on expenses and costs by reducing number of employees, introducing technology.

• Reduction of costs - The monetary value that a business has spent in order to produce something. 
• - The pressure to reduce costs is a main driver to implement change and one of the quickest ways to increase profits.
• - Costs in areas such as purchasing, production, sales and marketing, finance and administration can impact a business.
• - Cost cutting examples: employing staff part time rather than full time, outsourcing some tasks, ordering in bulk. 

• Globalisation - The process where economic boundaries are removed and businesses operate on an international scale.
• - Globalisation can act as a driving force through:
• - Giving increased access to markets around the world.
• - Providing opportunities for customers to improve their standard of living through increased access to goods and services
• - Providing the potential for faster business growth as companies can develop more trading relationships with other countries

• Technology - Practical application of science to achieve commercial objectives. 
• - Businesses may need to implement technology to remain competitive and increase efficiency.
• - E.g. Amazon Air introduced drones to deliver parcels and that may mean that other businesses such as Australia Post need to invest in that technology to remain competitive.

• Innovation - Changing or creating more effective processes and products to increase success.
• - Businesses will need to introduce new things or modify current business models to remain competitive.
• - Being able to innovate and develop new ways of thinking and doing business will give businesses a competitive edge. 

• Societal Attitudes - An acquired tendency to evaluate social things in a specific way. 
• - Society’s attitudes are constantly changing (changes in opinions, values and lifestyles).
• - These social attitudes can drive changes in businesses.
• - Eg. ageing population has led to changes such as increased demand for health services leading to the growth of new industries.
• - E.g. increased participation of women in workforce has led to more women with children working. This has created a need for childcare facilities, flexibility in work hours and increased demand of cleaning and home help services.

Restraining forces are factors that act against the driving force to resist the change e.g. employees, time, financial considerations.

• Managers - 
• - Managers can work against a change if they fear they will be impacted. This can often occur in middle and lower management
• - Managers may be resistant to change because it requires them to learn new things, take risks, or make difficult decisions.
• - Managers may lack the skills (e.g., leadership, communication, etc) to lead a change effectively which can work against the change

• Employees - 
• - Often the ones most impacted by a change and can cause resistance
• - Changes can bring on feelings of fear and anxiety amongst employees
• - Employees may be comfortable with their current work and change can bring challenges for the employees to learn new processes
• - Changes can impact an employee's day-to-day work or even their job security, causing resistance.

• Time - 
• - Change can be a complex and time-consuming process. Not having sufficient time can make implementation challenging
• - It may not be the best time to implement change. For example, economic conditions may not be idea, or business's finances may not be strong at the current time

• Organisational Inertia - A business’ culture and willingness to adopt change. OR the unenthusiastic response from a business and management to proposed change.
• - There is a tendency for the business to remain on its current trajectory
• - The people within the business are comfortable with the current state of the business, making it difficult to gather momentum towards a change.
• - For change to be successful in these situations, it often requires a significant disruptor to overcome the inertia, and push the business towards a new state.

• Legislation - 
• - Legislation or changes in legislation can prevent or make it difficult for businesses to implement their desired changes.
• - Legislation can increase the expenses of implementing a particular change. 
• - Can work against change by either preventing it completely, or increasing the cost and time it takes to implement the change.

• Financial Considerations - 
• - Managers need to consider the short-term and long-term costs of implementing a proposed change.
• - Changes with significant costs can work against a proposed change
• - Senior managers should conduct a cost/benefit analysis to ensure that any changes are financially viable and will not place the business under financial stress
• - Businesses should also consider how they will pay for the changes. (E.g., use their own funds or take on debt).
• - The expense of implementing changes can be significant and therefore work against the implementation of a proposed change.

- Competitive advantages: Can the business compete on being a differentiated product/service? Or can they compete on cost?

- Competitive scope: Should the business target a wide market or should it focus on a very narrow niche market

• - used to determine the best way to achieve a competitive advantage in a given market.
• - Porter states that businesses should select one strategy rather than be mediocre at both.
• - This is called being ‘stuck in the middle’ where the business loses focus.
• - However each strategy cannot completely ignore the other;
• - If a business is going to use a differentiation strategy they can’t be so unique that it will blow the costs out that it will make unprofitable.
• - They are still aware of the impact they will have on each strategy

• Lower Cost (Cost Leadership) Strategy:
• A strategy that allows a business to achieve a competitive edge by producing products in an industry at the lowest cost, through reducing operational or delivery expenses

• Cost leadership can take form in two different ways:
• 1. Increasing profits by reducing costs but still charge similar prices as its competitors. 
• 2. Increasing market share by charging lower prices but still making a profit due to savings made in reducing costs.

• How to achieve Cost Leadership:
• - Efficient use of resources
• - Offering high volumes of standardised basic products, limiting customisation.
• - Use of fewer parts and limiting number of models produced.
• - Low-rent areas.
• - Implement technology to reduce labour costs.
• - Buy resources in bulk or working with suppliers to get best possible price.
• - Use of Just In Time where stock levels are kept to a minimum.

• Advantages:
• - Increased market share because although charging a lower price, selling larger volumes.
• - Corporate culture that continually creates greater efficiency.
• - Emphasis on efficiency makes business well positioned to withstand competition.
• - Presence of a cost leader in industry tends to discourage new businesses from entering market because of thin profit margins.

• Disadvantages:
• - Lower customer loyalty because price-sensitive customers will swap brands easily.
• - Customers may associate a business that is a cost leader with poor quality.
• - Focusing on price can make business lose sight of customer tastes and preferences.
• - Low cost position can result in reducing costs in areas such as customer service resulting in deterring customers who seek better customer service.

• Differentiation Strategy:
• A strategy aimed to gain a competitive advantage through developing the uniqueness and attractiveness of a product or service in order to draw-in and retain customers.

• Differentiation allows a business to charge premium price and can be achieved through:
• - High quality products and services
• - Effective marketing and promotion strategies
• - Building relationships – e.g. Lebron James with Nike
• - Innovations and technology – e.g. Tesla self driving technology
• - Training – where employees become more skilled than competitors
• - Distribution – e.g.  Amazon is a powerful force in distribution & offer customers one hour delivery

• Differentiation strategy is appropriate when:
• - The target customers are not price sensitive.
• - Market is competitive.
• - Customers have specific needs which are not being met.

• Advantages:
• - Enables business to charge premium price that is greater than the extra cost incurred by differentiation
• - Builds customer loyalty who are unlikely to switch to a competitor’s products.

• Disadvantages:
• - Expensive
• - A company must worry about competitors' copying its business methods and stealing away its customers
• - Some customers may prefer cheaper alternative of products that have imitations (e.g. sunglasses and handbag brands)

• Similarities:
• - Both seek a competitive advantages
• - Both aim to make a profit
• - A business must choose one or the other
• - Both seek to maintain quality standards to meet customer expectations.
• - Both aim to increase their market share

• Differences:
• - LC appeals to price sensitive customers, Differentiation can charge premium prices
• - LC does not develop brand loyalty (due to customers seeking lower price), Differentiation appeals to/increases brand loyalty
• - Products are not unique due to the removal of key attributes to minimise costs. Uniqueness is created through attributes such as durability, packaging, multi-branding
• - LC seek to minimise Costs in operation. Differentiation is open to the increase costs in operations, if it adds superiority and still maintains profit.