Business Unit 7

• data that can be used to assess strengths/weaknesses of a business

  • Operations data: productivity - average output per worker, higher productivity increases efficiency meaning get most value from costs. Unit costs - as a firm grows it can spread total costs over a large number of unit to benefit from economies of scale
• Data that can be used to assess strengths/weaknesses of a business

  • Quality levels: quality is vital in establishing a strong brand image and developing customer satisfaction, loyalty and in turn repeating sales and high market share. Can be measured from defect rate, complaints figures, punctuality, and speed of delivery etc
• Capacity Utilisation


  The percentage of a firm's full production capacity that it's actually using
• Capacity Utilisation


  • Helps show how effectively a firm is using its staff, assets, and resources to produce product/service as cost effectively as possible to help them charge a competitive price
  • Important to be high to ensure maximum revenue and profit is made, and that business is benefiting from economies of scale by spreading total costs over as many units as possible
• Capacity Utilisation being too high


  Causes operational problems such as low morale, quality issues, inability to accept new orders, no spare time for training, asset maintenance etc.
• Measures that can be used to assess a firms performance in HR data:

  • Labour turnover & Retention: can bring new ideas but may involve losing skills and experience
  • Motivation & Staff Morale: poor motivation will affect efficiency
  • absenteeism & accident levels: poor morale may lead to greater number of accident/ days off
  • Labour per unit costs and total staff pay
  • Employer - Employee relations:

  staff happy? communication?
• Measures that can be used to assess a firms performance in marketing data:

  • market size and growth
  • sales figures
  • market share
  • brand value & consumer awareness
  • customer satisfaction levels
• Importance of core competences

  • Core competency = management theory introduced by Dr C K Prahalad and Prof. Gary Hamel
  • CC - main strengths a firm has that should provide it with a competitive advantage over its rivals
  • resilts from a specific set of skills or production techs that deliver additional value
• Three criteria that needs to be fulfilled for a ’true’ core competency

  1. provide potential access to a wide variety of markets
  2. should make significant contribution to perceived customer benefits
  3. be difficult to imitate by competition
• • Core competencies are the skills and knowledge that are necessary for a business to operate efficiently and effectively.
  • Developed through the process of continuous improvements over a period of time rather than one large change
• Core competencies


  The base on which a company's success grows
• Core competencies


  • They are the foundations on which successful companies developed their product range
  • Successful businesses should focus on the areas they have strength and expertise, e.g. fibre optics, software design, 3D-print technology, etc. and continue to build on them
  • Once they have these core strengths and have developed core products they can use these strengths to move into new areas and products based on their skills and expertise
  • These competencies add value to customers often allowing high prices to be charged and are what make companies unique and stand out in a market
• Core competencies


  Are what make companies unique and stand out in a market
• Outsourcing


  Using another firm to complete part of your operations
• This theory led many managers to believe that they should outsource any non-core activities to focus on what it does best and to maintain its competitive advantage
• • Some criticise the theory because it encourages businesses to focus on a narrow range of key strengths or skills, which may not be enough in modern dynamic markets
  • It also encourages outsourcing which may cause a business to weaken its
• two business models used to help assess overall business performance in short and long term

  1. Kaplan and Nortons balanced scorecard model
  2. ElKingston’s triple bottom like (PPP)
• Kaplan and Nortons balanced scorecard model

  • Planning management tool designed to match business activities to aspirations set out in their vision and strategy
  • aims to improve internal and external communications with key stakeholders and monitor performance against aims/ objectives
  • States financial data alone is insufficient to measure performance
  • enables them to clarify their vision, plan the necessary strategy and actions to achieve it
• Balanced scorecard model


  Designed by Kaplan and Norton to allow managers to consider four key areas including both traditional financial and non-financial measures
• Four key areas of the balanced scorecard


  • Financial perspective
  • Customer perspective
  • Internal processes
  • Learning and growth
• Financial perspective


  Measures such as cash flow, revenue, profit, ROCE, etc.
• Customer perspective


  How does the customer view the company and brand? How does the firm build and maintain loyalty? e.g. customer service ratings, delivery times, etc.
• Internal processes


  What aspects of a business's internal operations may need to be improved and made more efficient for a business is to meet its objectives? e.g. productivity, labour turnover, etc.
• Learning and growth


  How can the company continue to improve and create value in the future through R&D, innovation and learning? e.g. training, R&D spending, level of innovation, etc.
• The areas of performance offer a balance between short-term and long-term time frames
• Using the balanced scorecard


  1. Identify what a firm wants to achieve (objectives)

  2. Measure its performance in these areas (measures)

  3. Set a specific target to achieve

  4. Determine how it intends to do it (initiatives)
• The use of the balanced scorecard encourages managers to think about what needs measuring if the business is to achieve its objectives and how it will do it
• kaplan and Norton’s Balanced scorecard model

  
• Elkingtons Triple Bottom Line

  1. People
  2. Planet
  3. Place
• Firm's 'bottom line'


  Traditionally refers to their profit figure (the bottom line on the income statement) and is often the main measure of business success
• Triple bottom line (TBL)


  A method of measuring business performance that goes beyond traditional measures such as profits, return on investment and shareholder value
• The term triple bottom line (TBL) was developed by John Elkington


  1994
• Triple bottom line


  • Includes a firm's social responsibilities to its stakeholders as another key area that must be measured and included when analysing business performance
  • Measures the organisation's impact on people and on the planet as well as profit
  • A way of expressing a company's impact and sustainability
• The triple bottom line states that companies are responsible to all the stakeholders that are impacted by its operations, including the planet
• With the triple bottom line model, shareholders are just one of the stakeholder group but are not any more important than any other
• PESTLE analysis - framework for assessing the key features of the external environment in which a business operate

  Political Economic Social Technological Legal Environmental and ethical
• Political

  • Competition policy
  • Industrial regulation
  • Gov spending and tax policies
  • Business policy and incentives
• Economic:

  • Interest Rates
  • Exchange Rates
  • Consumer spending and income
  • Economic Growth [GDP]
• Social

  • Demographic change
  • Impact of pressure groups
  • Consumer tastes and fashion
  • Changing lifestyles
• Technological

  • Disruptive technologies
  • Adoption of mobile technology
  • New production processes
  • Big data and dynamic pricing