Change
Define change
An alteration to a business and/or it's work environment.
Identify 5 KPIs
Percentage of market share
Number of sales
Net profit figures
Level of wastage
Rate of productivity growth
Level of staff turnover
Rate of staff absenteeism
Number of workplace accidents
Number of customer complaints
Number of website hits
Define driving force and restraining force.
Driving forces are those factors that are pushing in a particular direction and supporting the goal or proposed change.
Restraining forces are factors that act against the driving force to resist the change e.g. employees, time, financial considerations.
Identify the two generic strategies suggested by Porter.
Lower cost
Differentiation
What changes have occured at Netflix?
- Introduction of ad supported cheaper subscription plan.
- Tightening of password sharing.
- Restructuring of film studio, redundancies, $300m budget cut
- Increased use of AI on home page, more conversational searches to enhance user experience.
Define proactive change.
A change that is planned and occurs before a business is affected by pressures in their environment.
A business has just launched a new website. Identify one KPI that could measure its effectiveness.
Number of website hits.
Identify the 4 principles of the Force Field Analysis
Weighting
Ranking
Implementing a response
Evaluating a response
What does Porter suggest that these strategies allow a business to achieve?
A competitive advantage.
Justify if Netflix has been proactive or reactive in their approach?
Netflix has been somewhat reactive with regards to the change. They have been impacted significantly before taking action. Many of their competitors have been in the market for some time and have taken market share away from Netflix, however in the past their subscriber numbers continued to grow. Yet, with the streaming industry maturing somewhat, they have lost over 1 million subscribers before acting.
Provide an example of how reactive change could come about.
Observing the actions of competitors, then seeking to implement similar processes to ensure that the business remains competitive. Dealing with a crisis
Justify two KPIs that could be used to measure employee morale.
Level of staff turnover - if turnover is low it suggests that morale is high and staff want to keep working in the business.
Rate of staff absenteeism - if rate of staff absenteeism is low it indicates that staff morale is high and staff are happy to regularly come to work.
What is involved in the 'weighting' step of a force field analysis?
Identifying the driving and restraining forces for change. Scoring and attributing a value to the driving and restraining forces e.g. a numerical score between 1 (low score) to 5 (high score).
A strategy that involves a business offering customers similar or lower priced products compared to the industry average, whilst remaining profitable by minimising expenses.
Describe two KPIs that have influenced the changes at Netflix.
- Number of sales/ subscribers - 1 million subscribers lost between April and July 2022
- Net profits declined 12.2% in 2022
- Percentage of market share - declined to an estimated 32%
Distinguish between proactive and reactive change.
The key difference is that proactive change occurs before a business has been affected by pressures in their environment, whereas reactive change occurs after a business has been affected by pressures in their environment.
Why do businesses use KPIs?
- Businesses can make major strategic decisions using the information they have collated from KPIs.
- KPIs are often used as the evidence a business uses to identify they need to change.
- To evaluate if a change has been successful.
Explain two driving forces for change.
Managers
Competitors
Pursuit of profit
Globalisation
Innovation
Legislation
Reduction of costs
Pursuit of profit
Technology
Societal attitudes
Owners
How could a business adopt the differentiation strategy?
High quality materials, products and services
Effective marketing and promotion strategies e.g. Red Bull
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 offer customers one hour delivery
Describe two driving forces for the changes at Netflix.
- Competitors: as new services have entered market customers are deciding which service they want to pay for, causing Netflix to make changes.
- Pursuit of profits - Introducing ad based plans was to increase profits through increased ad revenue
- Reduction of costs - reducing $300 million in film department
- Societal attitudes - cost of living crisis, reducing streaming services.
- Managers - COO, Greg Peters has been at the forefront of these changes, citing the need to attract users.
What is a similarity of reactive and proactive change?
- Both approaches are utilised by a manager or business to implement change.
Explain the relationship between number of customer complaints and rate of staff absenteeism.
If customer complaints are high this could create a stressful work environment as employees will often be dealing with the complaints. If employees are stressed they are more likely to take time off work, increasing rate of staff absenteeism.
What two forces from the study design can be considered both driviing and restraining forces?
Describe an advantages and a disadvantage of the differentiation strategy.
Advantages
Enables business to charge premium price that is greater than the extra cost incurred by differentiation
Builds `brand loyalty’ with customers who are unlikely to switch to a competitor’s products.
Disadvantages
Sometimes the unique features can be copied by competitors
Being unique will often increase costs
It will narrow the market and will not work for `price sensitive’ consumers
Justify which of Porter's Generic Strategies Netflix has taken?
Differentiation: While other streaming services have entered the market, Netflix has attempted to maintain their uniqueness by spending significant amounts on producing their own content (expected to spend $18 billion in 2025). While there will be a reduction in this spending, they are still the largest spender in this area in the industry.
Low cost: Job cuts from restructure and offering lower prices to attract price sensitive consumers.
There is an argument they are stuck in the middle.