learn.stleonards.vic.edu.au€¦ · Web viewThe following assessment task for Outcome 1 in VCE Business Management Unit 4 (Transforming a Business) focuses on the constant pressures

COMPAK | BUSINESS MANAGEMENT UNIT 4

BUSINESS MANAGEMENT UNIT 4

Unit 4, Outcome 1 assessment task: structured questions and case study

GITA MENON | SWINBURNE SENIOR SECONDARY SCHOOL

The following assessment task for Outcome 1 in VCE Business Management Unit 4 (Transforming a Business) focuses on the constant pressures placed on businesses to adapt and change to meet their objectives. The task addresses the role of key performance indicators (KPIs) when analysing the performance of a business, together with the influences of the driving and restraining forces that affect change within a business. In addition, the task assesses students’ ability to determine the most suitable management strategy to position a business for the future. Suggested answers are provided.

ASSESSMENT TASK DETAILSName of taskStructured questions and case study

Unit/area of studyUnit 4: Transforming a Business

Area of Study 1: ‘Reviewing performance—the need for change’

Outcome 1‘Explain the way business change may come about, use key performance indicators to analyse the performance of a business, discuss the driving and restraining forces for change and evaluate management strategies to position a business for the future.’

Source: VCE Business Management Study Design (2017–2021), VCAA, page 21

Key knowledge and key skillsThis task addresses all of the key knowledge and key skills outlined in Area of Study 1 in Unit 4.

vcta.asn.au | published June 2018 | © VCTA and Gita Menon


INSTRUCTIONS AND CONDITIONS

Answer all questions in this answer book. The marks for each question are indicated after each question. Additional space is available following the questions if you need extra paper to complete an answer. If you use this additional space clearly label all answers with the appropriate question number.

Conditions: Closed book

Time allowed: 75 minutes (plus 10 minutes reading time)

Marks allocated: 50 marks

STRUCTURED QUESTIONSQuestion 1 (10 marks)

a. ‘There is nothing as permanent as change.’ Explain this statement in the context of a business. 2 marks

b. Analyse the relationship between the key performance indicator (KPI) staff turnover and a change in a business. 2 marks



c. KPIs are used to reflect the performance of different areas of management responsibility.

Define the following KPIs, and for each outline how the data can help managers analyse the performance of their area of responsibility. 6 marks

i. percentage of market share

ii. level of staff turnover

iii. level of wastage



CASE STUDY

Read the following case study and answer the questions below.

Sheepskin Boots is an Australian business producing quality sheepskin footwear for men, women and children. The business is facing declining demand, high costs and declining productivity and has recently undergone restructuring and a refocus of its strategic goals to position it better for the future.

A staff survey was conducted after the refocus and the result for one question is shown in the chart below.

42%

58%

Can you recite Sheepskin Boots' new vision, mission and values?

YesNo

Question 2 (16 marks)

a. On the basis of the survey response shown in the chart, analyse the likely impact on staff of the refocus of Sheepskin Boots’ strategic goals. 2 marks



b. Explain one driving force that could have pressured Sheepskin Boots to refocus its strategic goals. 2 marks

c. Explain one restraining force that Sheepskin Boots could have faced in its recent restructuring and refocus of its strategic goals. 2 marks

d. Compare the two key approaches of Porter’s Generic Strategies and recommend and evaluate one approach to strategic management that Sheepskin Boots could use to gain a competitive advantage. 10 marks






84 88 92 96 0 4 8 120.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Trend in Australia's labour productivity growth (1984–2012) %

Reference: Australia productivity, Trading Economics, https://tradingeconomics.com/australia/productivity

a. Based on the rate of labour productivity growth as indicated in the chart above, Sheepskin Boots is considering relocating its manufacturing to China.

i. Describe Australia’s rate of productivity growth since 1996. 1 mark

ii. Select a KPI of your choice and analyse how it would be affected if Sheepskin Boots relocated its manufacturing to China. 2 marks


https://tradingeconomics.com/australia/productivity


b. Distinguish between a proactive and a reactive approach to change. 2 marks

c. Outline if Sheepskin Boots’ plan for its manufacturing is a proactive or reactive approach to change. 1 mark

d. Explain how Sheepskin Boots’ management could apply Lewin’s Force Field Analysis theory to decide if the business should relocate its manufacturing to China. 6 marks



e. Explain how globalisation could play a role in Sheepskin Boots’ plans. 2 marks

f. Explain a strategy that could be used to overcome organisational inertia. 2 marks


For each of the following situations, identify the force for change and outline its impact on Sheepskin Boots.

a. A new, more efficient technology for making shoes has been introduced in the market. 2 marks



b. China imposes taxes on imports of animal skin products. 2 marks

c. A new Chief Executive Officer (CEO) is recruited to oversee Sheepskin Boots’ plan for the future. 2 marks

d. A bank loan for Sheepskin Boots’ expansion has been rejected. 2 marks



Extra space for responsesClearly number all responses in this space.



Suggested answersNote: The answers below are suggestions only. For some questions, more than one answer is possible.


a. ‘There is nothing as permanent as change.’ Explain this statement in the context of a business. 2 marks

Businesses are under constant pressure from their external and internal environments to change. For instance, a business might need to change in response to societal pressures exerted from the external environment or to changes in its operating environment, such as the unavailability of supplies or a price increase in supplies.

An internal environment pressure could be an objective, such as one requiring the business to increase its level of profitability. This will place pressure on all areas of the business to determine where change needs to occur to meet this objective.

Marking guide:

1 mark for explaining the fact that businesses are under a constant need to change due to pressures

1 mark for providing an example of a pressure

b. Analyse the relationship between the key performance indicator (KPI) staff turnover and a change in a business. 2 marks

Staff turnover is the percentage of staff leaving a business that need replacing. If the percentage increases, it could be assumed that the change strategies implemented by the business have not been well received. People could be voluntarily leaving, leaving because their job positions have been redefined or replaced by technology. This will in turn create an uncertain environment in the business and the change might not be successful.

Marking guide:

1 mark for stating the meaning of the staff turnover or its essential features

1 mark for providing the link between the KPI and a change in a business

c. KPIs are used to reflect the performance of different areas of management responsibility.

Define the following KPIs, and for each outline how the data can help managers analyse the performance of their area of responsibility. 6 marks

i. percentage of market shareThis is the proportion of sales a business has in comparison to its competitors in the industry and expressed as a percentage. The higher the percentage of market share, the better it reflects on the performance of managers responsible for sales and marketing. This data can be used when managers are making decisions in areas such as customer experiences, the effectiveness of product promotions and identifying new opportunities.



ii. level of staff turnover

This is the number of staff leaving the business that need replacing. A higher figure would reflect negatively on the human resources area because it is responsible for ensuring the retention, motivation and morale of employees. Managers could use this data to make decisions in areas such as career pathways, mentoring programs, training programs and other incentives to encourage staff to stay.

iii. level of wastage

This is the amount of by-product generated when transforming an input into output. Managers could examine this data to identify specific causes of high or low levels of efficiency and make processing and resourcing decisions to keep waste to a minimum and output to a maximum.

Marking guide:

1 mark for stating the meaning or essential features of each KPI (x three = 3 marks)

1 mark for linking how the data associated with each KPI can be used by managers to make business decisions (x three = 3 marks)


a. On the basis of the survey responses shown in the chart, analyse the likely impact on staff of the refocus of Sheepskin Boots’ strategic goals. 2 marks

It is evident from the chart that the majority (58%) of staff are not aware of Sheepskin Boots’ new mission, vision and values, which reflect the strategic goals of the business. As a consequence, they will not be making adjustments to their work to assist in achieving the new refocused goals and this implies that the refocus is not likely to be successful.

Marking guide:

1 mark for correctly interpreting the chart

1 mark for linking the results of the survey to the likely effect on the achievement of the refocused goals

b. Explain one driving force that could have pressured Sheepskin Boots to refocus its strategic goals. 2 marks

Note: There are other possible answers to this question. Other possibilities include the pursuit of profit, globalisation, innovation and new management.

Sheepskin Boots is facing the pressure of rising cots so a driving force to make changes to its focus could be a reduction of costs. The business will be looking to introduce cost-saving measures to increase the profits again. It could consider introducing technology to replace high cost staff or improving the sourcing of its sheepskin to reduce costs.

Marking guide:

1 mark for identifying the appropriate driving force

1 mark for making a logical connection between the driving force and the change in the goals



c. Explain one restraining force that Sheepskin Boots could have faced in its recent restructuring and refocus of its strategic goals. 2 marks

Note: There are other possible answers to this question. Other possibilities include organisation inertia and financial considerations.

A restraining force that could have provided resistance to the change in Sheepskin Boots’ focus could be employees who feared either changes in their roles or job losses if the business changed its products or outsourced production. This employee resistance could be shown by either their non-compliance with new procedures or they might lack motivation to achieve the new business goals.

Marking guide:

1 mark for identifying the appropriate restraining force

1 mark for illustrating how the restraining force could apply additional pressures on the change process

d. Compare the two key approaches of Porter’s Generic Strategies and recommend and evaluate one approach to strategic management that Sheepskin Boots could use to gain a competitive advantage. 10 marks

Porter’s Generic Strategies are based on the concept of competitive advantage and the approaches businesses could adopt to acquire this. The two key approaches or strategies are cost leadership and differentiation strategy.

The cost leadership strategy involves the business focusing on reducing costs and therefore either increasing its profit or passing the profit onto the customers in the form of lower prices. This gives the business a competitive advantage over its competitors. Examples of businesses using this strategy are Costco and IKEA.

The differentiation strategy is based on the business developing a unique product or service that is not available elsewhere and hence gaining competitive advantage over other players. Normally the prices charged for these products or services are at market level or slightly higher as customers are not price sensitive. An example is Tesla electric cars.

The key difference between the two strategies is their focus. The cost leadership approach has an internal focus, with the business looking at generating economies of scales and efficiencies within the business to reduce costs. This compares with the differentiation strategy that is externally focused. It depends on the business creating a unique product or service that meets a customer need and it actively markets and promotes this differentiation. Another difference is businesses using the cost leadership approach will tend to offer lower prices, passing on the cost benefits they generate to price-sensitive customers, whereas differentiation strategy businesses generally offer higher priced products and attract customers who are quality conscious and not sensitive to price.

With both approaches, it is easier for larger businesses to spend on research and development to innovate or use economies of scale to reduce costs.



For Sheepskin Boots, I recommend that they use the cost leadership strategy to gain a competitive advantage because it is currently losing profits and this position might not be sustainable. Its products are already unique. Sheepskin Boots could look at reducing costs by outsourcing production to China and therefore lowering its prices. This would attract the more price-sensitive customers and increase its competitive advantage over other businesses. It could also look at increasing the automation level of its production. This would reduce labour costs and hence increase productivity. However, this could lead to a lower perception of the quality of its products as they would now be made in China, not Australia. Overall, I believe, that this disadvantage will be outweighed by the advantage of being able to lower prices and increase customer appeal, which will result in a higher competitive advantage.

The cost leadership approach will help Sheepskin Boots increase its market share. It is also recommended that Sheepskin Boots closely monitor the quality standards in its Chinese manufacturing sites to ensure customers still get the same quality products.

Marking guide (global):

1–5 marks for identifying the similarities or differences between the differentiation and cost leadership approaches to strategic management

1–5 marks for determining the value of one approach, in terms of its advantages and disadvantages, based on criteria


a. Based on the rate of labour productivity growth as indicated in the chart above, Sheepskin Boots is considering relocating its manufacturing to China. i. Describe Australia’s rate of productivity growth since 1996. 1 mark

The labour productivity growth rate increased from 1996 to 2000 and has declined steadily since then.

Marking guide:

1 mark for stating the increasing and decreasing trends in the graph

ii. Select of KPI of your choice and analyse how it would be affected if Sheepskin Boots relocated its manufacturing to China. 2 marks

Note: There are other possible answers to this question. Other possibilities include staff turnover, level of staff absenteeism, number of customer complaints.

These statistics should convince Sheepskin Boots to relocate manufacturing to China as the cost of producing in Australia has become too high. This decision could result in increased profit levels as labour costs in China are lower than Australia’s costs. Therefore the KPI of profits will improve if Sheepskin Boots decides to relocate its manufacturing to China.

Marking guide:

1 mark for identifying why the relocation would affect an appropriate KPI (cause)

1 mark for identifying the effect of the relocation on the selected KPI (effect)



b. Distinguish between a proactive and a reactive approach to change. 2 marks

A proactive change is when a business anticipates the factors that could bring about change in the future and adapts its business before the change affects them negatively. Conversely, a reactive change is when a business does not anticipate the factors that are causing change and instead reacts to the changed factors to prevent a negative impact. Typically anticipating or preparing for change rather than responding to change increases the likelihood of business success.

Marking guide:

1 mark for noting a difference between each of the types of changes (x two = 2 marks)

c. Outline if Sheepskin Boots’ plan for its manufacturing is a proactive or reactive approach to change. 1 mark

Sheepskin Boots is planning proactively to relocate its production to China as it recognises it needs to change its manufacturing processes to reduce costs. It is anticipating the negative impact that low productivity will have on its costs.

Marking guide:

1 mark for stating it is a proactive change

d. Explain how Sheepskin Boots’ management could apply Lewin’s Force Field Analysis theory to decide if the business should relocate manufacturing to China.

6 marks

Lewin’s Force Field Analysis is a planning tool which can help a business decide if the change it is planning will be successful. The basis of this tool is that for every change proposal there will be driving forces that support the change and restraining forces that resist the change, and a change is successful only if the driving forces are stronger than the restraining forces.

To use this planning tool, a business would typically follow a series of steps. Initially it should define the target of change and identify the process it wishes to follow to implement the change. Next the business should identify the driving forces that will support the change. In Sheepskin Boots’ case, it could be the pursuit of increased profits or the reduction of costs and these will be improved by relocating manufacturing to China.

Businesses also need to identify the restraining forces that could prevent the change occurring. In Sheepskin Boots’ case it could be employees who might resist the relocation as they will lose their jobs. Financial costs could also be a restraining force as local staff would require redundancy payments and there are costs associated with setting up a new manufacturing facility in China.

Based on Lewin’s theory, it is important that the restraining forces are weaker than the driving forces, so Sheepskin Boots will need to understand which of the restraining forces can be turned into a driving force. Once this is done, an action plan will need to be finalised and it could include how the business is going to financially support the change as well as strategies for handling employees. These could include holding information sessions about why the change is being made and how the employees will be financially treated, such as voluntary redundancies. These actions should minimise the effect of the restraining forces and strengthen the driving forces, making the change viable.



Marking guide (global):

1–4 marks for explaining the key elements of the theory and how the tool (steps) can be applied to identify and evaluate factors affecting the success of change and the issues and propose a plan

1–2 marks for applying the planning tool to the case study

e. Explain how globalisation could play a role in Sheepskin Boots’ plans. 2 marks

Globalisation is the economic phenomenon whereby markets and customers are no longer restricted to a local area and businesses can source from, and supply to, any part of the world. This is because of faster communication and transportation technologies, free trade legislation and open markets.

Globalisation is a driving force for change for Sheepskin Boots. The world is now available for Sheepskin to sell to and source from, and their plan to relocate manufacturing to China to reduce costs is made possible because of this phenomenon.

Marking guide:

1 mark for describing the key characteristics or features of globalisation

1 mark for explaining how globalisation is a driving force for Sheepskin Boots in their plan to relocate manufacturing to China

f. Explain a strategy that can be used to overcome organisational inertia. 2 marks

Organisational inertia is the lack of ability of a business to change. It is the tendency of a business to continue proceeding in its current direction. Every business has this inherent inertia and it is a restraining force of change. For a business to overcome this inertia, the driving forces need to be stronger than the restraining forces. For example, if a business is having difficulty changing direction and the employees are identified as the restraining force, management could hold sessions with staff to try to convince them of the urgency for change or it could take a different approach and create a change team management responsible for driving the change.

Marking guide:

1 mark for providing the key characteristics of essential features of organisational inertia

1 mark for explaining a strategy to reduce organisational inertia


For each of the following situations, identify the force for change and outline its impact on Sheepskin Boots.

a. A new, more efficient technology for making shoes has been introduced in the market. 2 marks

This new, more efficient technology is a driving force for change as it could make shoes faster and cheaper for Sheepskin Boots. This would increase their productivity and in turn increase profits.

Marking guide:

1 mark for identifying it is a driving force

1 mark for providing the impact of this force on Sheepskin Boots



b. China imposes taxes on imports of animal skin products. 2 marks

This could be considered legislation and is a restraining force for change. It will negatively affect Sheepskin Boots if it proceeds with its plan to relocate manufacturing to China because the sheepskins it sends to China will be classified as imports, making them more expensive.

Marking guide:

1 mark for identifying it is a restraining force


c. A new Chief Executive Officer (CEO) is recruited to oversee Sheepskin Boots’ plan for the future. 2 marks

This would be a driving force for change as the new CEO has been recruited primarily to push for this relocation change. It is highly likely that the CEO will quickly introduce strategies to ensure the change is successful.

Marking guide:

1 mark for identifying it is a driving force


d. A bank loan for Sheepskin Boots’ expansion has been rejected. 2 marks

This would be a restraining force as the loan rejection will reduce Sheepskin Boots’ available funding for the relocation. The decision might also make Sheepskin Boots reconsider its financial situation as the bank must have questioned its ability to service the loan.

Marking guide:

1 mark for identifying it is a restraining force




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Disclaimer: This assessment task has been written by the author (Gita Menon) for use with students of VCE Business Management. This does not imply that it has been endorsed by the Victorian Curriculum and Assessment Authority (VCAA). The current VCE Business Management Study Design (2017–2021) can be accessed directly via the VCAA website. VCE is a registered trademark of VCAA. While every care is taken, we accept no responsibility for the accuracy of information or advice contained in Compak. Teachers are advised to preview and evaluate all Compak classroom resources before using them or distributing them to students.


http://www.vcaa.vic.edu.au/Pages/vce/studies/busmngmnt/businesstindex.aspx

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learn.stleonards.vic.edu.au€¦ · Web viewThe following assessment task for Outcome 1 in VCE Business Management Unit 4 (Transforming a Business) focuses on the constant pressures