Business Management UNIT 4- OUTCOME 1

Reviewing Performance____________________________________________________________

This SAC is a written response. You are not permitted to use any other materials.The total SAC contributes to 50/100 marks allocated for Unit 4.

Name: Examiner’s report

__________________________________________________________

Note: The grade or score for this task is only part of the internal assessment for this Unit. Your total School-assessed Coursework score may change as a result of statistical moderation by VCAA.

Grade/Score: ______ Satisfactory Completion? S/N: ______(Provisional)---------------------------------------------------------------------------------

Assessment CriteriaCriteria H M L NS

Define, describe and apply relevant business management concepts and terms

Research and analyse case studies and contemporary examples of business management applicable to evaluating key performance indicators and sourcing business opportunities in a business

Interpret key performance indicators to analyse and evaluate business performance

Apply business management knowledge to practical and/or simulated business situations

Compare and evaluate relevant management strategies

Name:

Did I……1

Friday 20th July 2018:You will have 80 minutes to complete this SAC plus

10 minutes reading time.

1. Identify ALL KPIs exactly as listed on the study design? yes or no2. Define KPIs without being circular? yes or no3. Use sentence starters to answer questions clearly? yes or no4. Underline information about number of Fairfax readers? yes or no5. Underline information about Target lacklustre sales and unprofitable stores

being converted into Kmarts? yes or no6. Underline information about Target and Kmart sales trends?

yes or no7. Clearly identify Porter features when comparing? yes or no8. Reference Kmart positioning itself as an everyday low-price discount

department store when evaluating Porter? yes or no9. Reference Kmart using home décor as a way to differentiate itself using Porter?

yes or no10. Provide a strong choice, using evidence, of either lower cost or differentiate to

evaluate Porter? yes or no11. Clearly explain why globalization and technology can encourage a business to

change? yes or no12. Clearly discuss how management and technology would encourage change in

Kmart or Target? yes or no__________________________________________________________________________________

3 ways I can improve my outcomes are:

1.

2.

3.

The feedback tip I benefited from most was……because……

SECTION A

2Instructions for Section A

Answer all questions in the spaces provided.

Question 1 (3 marks)Define business change, providing two reasons why a business could need to change.

1 mark to define.2 marks for two reasons.This question was generally well handled. Most were able to correctly define business change by making reference to the adoption of a new idea or behaviour or due to alteration in the internal or external environments. A tip is to think of how the different business environments could motivate change.Most clearly gave two reasons but some did not explain ‘why’ the business needed to change.Eg. a business could need to change to reduce costs to be competitive with rival businesses in the industry. Eg. a business could need to change due to changing societal attitudes. Eg. a business may use recycled materials to reduce the business impact on the environment.

Question 2 (2 marks)Explain proactive business change, proposing why this is often the best option for a business.

1 mark to explain eg. initiate or predict alterations in trading environment.1 mark to explain why best option.This question was generally well handled. ‘why’ refers to, for example, a business avoids losing customers to competitors if it is slow to change to customer preferences for innovative products or technological advancements or better customer service or reduced retail prices or better environmental behaviour.

Question 3 (5 marks)

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Describe Lewin’s Force Field Analysis theory, outlining why it is an important management tool for a business.This question was marked globally.

Key points to remember about Lewin are: - identify D and R forces- rank each in importance- remove restraining forces- strengthen driving forces- allocate necessary actions to staff to allow change to proceed- ‘why’ = business / managers can then determine likelihood of successful

change [when D greater than R forces]

Sample answer: Lewin’s Force Field analysis refers to the process of determining what driving and restraining forces are for a proposed change. It involves first identifying the driving forces for change and then the restraining forces for change before ranking them with a numerical number [5 being strong and 1 being weak]. Then the manager can see which restraining forces they need to remove first and which driving forces should be promoted. This then allows management to come up with a list of actions to be given to each member of staff in the aim to implement the proposed change. This analysis is important for managers as it allows the management to see the likelihood of potential success, as if the driving forces outweigh the restraining forces it helps them to realise they should pursue the change. As well as advising them to take another approach if restraining forces outweight driving, which can save the business resources.

Question 4 (18 marks)

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Fairfax is one of Australia’s largest media companies owning newspapers, radio and media apps (such as domain) throughout Australia. In recent years, the newspaper empire has struggled to make a profit. Here in Victoria, Fairfax is synonymous with The Age newspaper. Recent data by the Roy Morgan Research found the publication is increasing its overall audience in online and print at a greater rate than its metropolitan rivals. Its number of digital readers had increased from 2.3 million to 2.6 million in the past year. Its total readership (of print, web or app news) rose 10.9 per cent to more than 3.1 million people, up by 305,000 readers from the previous year.

a. Identify and define the key performance indicator illustrated in the data above. 2 marks

1 mark – identify1 mark – defineMost correctly identified the KPI as number of sales. It is important to be familiar with different types of data to avoid confusion. Clues were also given in the text. The % change in the data refers to the change over time for each publication (either increasing or decreasing in number of sales). The columns labelled ‘000s’ also indicated number of sales. Surprisingly, a number of students were CIRCULAR when defining the KPI! This was incredible given the emphasis on this in the kahoot.

b. Suggest and justify how two other performance indicators could be used by Fairfax Media managers to analyse business performance. 4 marks

2 marks – suggest 2 marks – how used by Fairfax.If the answer for part a was incorrect, a student was NOT penalized for a 2nd time. Hence, this question was marked independently to part a. A link to Fairfax was required. Suitable KPIs included net profit figures, % of market share, level of wastage, number of customer complaints. Eg. the level of wastage could assess performance at Fairfax by measuring the number of unsold print newspapers with an aim to decrease this level of wastage over each time period.Eg. % of market share would measure the total number of sales Fairfax had in the news industry compared to competitors such as Herald Sun. Fairfax would like to increase its total % of market share to indicate success.

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c. Explain how key performance indicators can be used as sources of data to assist in positioning a business for the future. 2 marks

A key performance indicator is specific criteria to measure the efficiency and effectivenesss of business performance. They assist a business in positioning for the future as they allow a business to evaluate past performance against set objectives and correct as necessary to improve performance over time.Tip: can use glossary to begin with and then link to ‘how’

d. Businesses are under constant pressure to adapt and change to meet their objectives. Using a contemporary business case study, analyse how driving and restraining forces would be investigated by management to meet business objectives. 10 marks

This Q is marked globally.A business of own choice could be chosen – the business studied in class was Fairfax. This Q asked students to ‘analyse’ so ‘examine in detail’ HOW driving and restraining forces affected the ability of Fairfax to change from a print news to a digital news focus.‘analyse’ does not specify pros and cons BUT they can be included to support your argument. Aim to examine 2 to 3 driving PLUS 2 to 3 restraining forces. Best driving include societal attitudes, technology and reduction in costs.Best restraining include employees, financial considerations and technology.

*must link to achievement of objectives.Logical objectives include – increase proft (or net profit figures), increase returns to shareholders, decrease costs, increase % of market share, increase number of digital sales.

Tip: Evidence in Q4 case study was that the reduction in costs to focus on an increase in digital sales was clearly successful due to increasing number of digital readers from 2.3 to 2.6 million.

SECTION B – Case study

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Source: https://www.news.com.au/finance/business/retail/a-tale-of-two-retailers-target-stores-could-be-converted-into-kmart-following-profit-crash/news story/5192e281d208cc143e963dd1dc67c7b4

Question 17

Instructions for Section BUse the case study provided to answer the questions in this section. Answers must apply to the case study. Answer all questions in the spaces provided.

TARGET has been an Aussie retail staple for years — but now, its future is in doubt. Yesterday, Wesfarmers managing director Rob Scott revealed the company had recorded a “non-cash impairment” of $300 million due to Target’s lacklustre sales.

In a media conference, Mr Scott confirmed some Target stores could disappear in Australia under the company’s new “non-committal approach”, which meant unprofitable Target stores could be converted into Kmarts if it was in the best interests of the wider company — although he ruled out the possibility of a complete merger. Kmart and Target were brought together two years ago under Wesfarmer’s Department Stores division fronted by Guy Russo, and since that time only two Target stores located at Broadmeadows and Templestowe in Victoria have been converted into Kmarts, with a third in the pipeline at Victoria Park in Perth.

While the company has not revealed any future planned conversions, Mr Scott emphasised that the compay’s focus would firmly be on Kmart moving forward. “ ... the way that we feel we can deliver better value to shareholders and importantly deliver a better customer offer is really to be doubling down on the business where we have the greatest point of difference with customers and that is Kmart,” he said.

Just a few years ago, both retailers were flourishing, with Target sales hitting $3.8 billion in 2011 compared to Kmart’s $4 billion. Last year Kmart’s sales had ballooned out to $5.58 billion while Target’s had plummeted to $2.95 billion. So where did it all go pear shaped? Dr Mortimer said Kmart had cleverly positioned itself as an everyday low-price discount department store while jumping on the emerging home decor market, while Target had struggled with an identity crisis.

a. Compare Porter’s Generic strategies of lower cost and differentiation. 2 marks

A 2 mark compare Q needs 1 similarity and 1 difference

Tip: For this Q, aim to clearly state the FEATURE – how it is a similarity or a difference. Some students ONLY included a difference! Surprising at this stage in the year…

Remember, BOTH strategies aim to gain a competitive advantage by attracting customers from competitors in the marketplace. [then flip as to how each business obtains a competitive advantage] Both strategies aim to overcome 5 forces. Eg threat of subtitutes or buyer bargaining power.

Other features include:

Size of business – eg. a large business best achieves a competitive advantage by using its strong buyer bargaining power so can purchase bulk raw material orders hence achieving economies of scale whereas a small business can best achieve a competitive advantage by creating a unique feature or benefit with its good or service.

How goods or services are produced – lower cost produces goods by reducing operating expenses to increase profit margins or transfer cost savings to lower retail prices whereas differentiation produces goods with a unique feature or benefit.

Use of cost savings – eg. lower cost use production efficiencies to increase profit margins or transfer savings to lower retail prices whereas differentiation use production efficiencies to cover cost of developing unique product features.

b. Outline how organisational inertia at Target could restrain this business from achieving future success.

3 marks1 mark – outline what organisational inertia is.2 marks – how it could restrain Target future success.Some students did not know what organisational inertia was– essential to know as links well to many case studies. It refers to an inability by management (or employees) to alter work behaviours / practices. This is evidence by Target’s lacklustre sales and identity crisis. As an established department store, Target managers are likely to have entrenched work routines which need to be changed to remain competitive in the current market.*Target might need to change its corporate culture from Target to Kmart shared values with new ideas, image and beliefs.

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c. Evaluate the use of Porter’s two generic strategies of lower cost and differentiation by Kmart.

6 marks2 marks – strength of using each strategy2 marks – weakness of using each strategy2 marks - overall view linking to use by KmartA number of students ‘forgot’ to evaluate! That is, they forgot to provide an overall view. Others provided a weak overall conclusion. Others suggested BOTH options were good.

To do this effectively, it was important to give a strong reason why Kmart should choose ONE of the options. Either option could be recommended.

For example, the use of lower cost could continue to be successful given Kmart’s position as an ‘everyday low-price discount department store’. This is also evident by the proven success with sales increasing from $4 billion in 2011 to $5.58 billion in 2017.ORFor example, the emerging home décor product range could allow Kmart to be a market leader with innovative goods. Despite the success of the lower-cost strategy as evidenced by the lower retail prices, differentiation would enable Kmart to be unique with less threat of substitute products being produced by rivals.

Lower cost achieves:

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Lowering production

costs

Business can Increase

profit margins

Business makes more

profit per sale than

competitors

So has the strength of

reducing rivalry

amongst existing

competitors

Lowering production costs

Business can lower retail prices

Business can attract customers from competitors

Leads to increased % market share. Is very effective for a large business that

has strong bargaining as buyers of raw

materials as can buy in bulk thus

achieving economies of scale

BUT

Differentiation achieves:

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Lowering production

costs

Business can lower retail

prices

Competitor rivalry can increase

leading to a price war

Price war leads to reduced

profit margins for the

business which threatens business survival

Lowering production costs

Difficult for a small business to do as cannot order raw

materials in bulk so cannot receive bulk

order discounts

Reduced buyer bargaining power of

small business owners leads to

reduced competitiveness in a marketplace eg. IGA

vs Coles supermarkets

Providing a unique good

or service

Business can attract

customers in industry

Can have a unique

advantage over rival

competitors that is

difficult to copy

So has the strength of

reducing threat of

substitutes

Providing unique good or

service

Business can provide

customers with a product or

service that is highly valued

Customers are more loyal to a business when

it provides highly valued

goods eg. Apple

This brand loyalty reduces rivalry amongst

existing competitors

BUT

d. Analyse two ways that Kmart and Target could be competitive rivals. 4 marks

2 marks for each clear way explained.

Many students struggled with this question and were unable to consider how previously learnt concepts could be used. It is important to learn to ‘think on your feet’ as there will always be challenging or unexpected questions. The idea for this Q was to use Porter’s generic strategies.

Thinking logically,

Kmart and Target are both large businesses so have strong buyer bargaining power utilise ‘economies of scale’ so will compete using this strategy to offer lowest possible retail prices using lower-cost strategy.

Both are in same industry (discount department stores) so both competing to attract customers seeking lower priced goods

Both face threat of substitutes if Target and Kmart both have a home décor range (due to attracting same customers with same spending power)

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Providing a unique good or

service

Can be difficult or expensive for

a business to source required raw materials

This will result in higher priced

goods which are not suitable for price sensitive

customers

Price sensitive customers may

choose to purchase

alternative goods from competitive

rivals eg. in supermarket

industry

Providing a unique good or

service

Can be expensive for a business to

create and advertise to the target market

A business that chooses to absorb the

product development

costs will have less net profit due to greater

expenses

This can be unprofitable for

a business aiming to

strengthen its position against

new competitors in the industry.

Eg. Myer vs H&M

e. Discuss management and technology as forces for change in this business.

4 marks2 marks for pros and cons of each force – linking to the case.The key for this Q was to link pros and cons of each strategy to Kmart or Target examples.Eg.Technology is a driving force because machines can improve the speed of production and increase the number of outputs produced in a period of time. However, the introduction of technology such as self-service checkouts at Kmart would initially have expensive start-up costs due to the purchase of the machines and training of staff in how to use them.Management is a drivng force as they use their skills as leaders and communicators to reduce staff resistance to change. However, a manager may have insufficient time to manage change successfully or may lack interpersonal skills to develop positive relationships with all staff affected by the negative impact of Target stores changing to Kmart stores.

f. Define globalisation and explain how this could act as a driving force for change at Kmart. 3 marks

1 mark was awarded to a logical definition of globalisation.2 marks was given to HOW Kmart could be motivated to change as a resulted of this force.Eg. globalisation is the movement across nations of trade, investment, technology, finance and labour brought about by the removal of trade barriers. This would act as a drivng force for Kmart because it increases access to international customers to increase sales revenue and profitability. It also encourages Kmart to be cost efficient so that it can compete effectively with international competitors.

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