Improving Business Performance

Contents Module Overview: ………………………………………………………………………………………………….. 3 Learning Outcomes:
……………………………………………………………………………………………. 3 Module Assessment
……………………………………………………………………………………………….. 3 Formative Activities & Assessment
………………………………………………………………………… 3 Summative Assessment
………………………………………………………………………………………. 3 Assignment
…………………………………………………………………………………………………………… 4
Module Overview: In today’s business arena, there is a variety of data available internally (Key Performance Indicators for example) and externally (Industry Reports)
that companies can collect that informs and helps them to report on and understand business performance. In turn this helps them to monitor the delivery of strategic
priorities and goals. At the same time, business aspiration to grow, to increase profits and market share and to be better than the competition calls for a focused
strategy. Typical areas of focus for improvement include strategy alignment, marketing practices, organization and operations, but deficiencies that require attention
can often be well hidden in the companies and within their policies and procedures. Against this background, business performance has to be seen holistically looking
at a variety of facets.. Learning Outcomes: On successful completion of this module, you will be able to: 1. To appreciate the contribution of the operations
function within the formulation of business strategy.
2. To analyse various business situations and recommend improvements using relevant approaches that meet the business needs.
3. To apply business improvement concepts and theory to scenarios and plan an improvement project
Module Assessment
Formative Activities & Assessment Formative activities are opportunities for you to apply, practice and make sense of the learning materials and content that you have
encountered. In this module, these include multiple choice questions, critical analysis of source materials, and reflection on your learning.
Assignment Specification
Coursework 2 (70%) – 3000 words report
Title: Operational Change: Which way? Choose an organisation that you work for, or are familiar with. i. Investigate your chosen organisation to evaluate how it is
currently performing, and identify three operational areas that require change.
ii. Start off by briefly introducing your chosen organisation and explaining what 3 changes you have identified and why you believe they should be made.
From the changes that you have identified, select one change that you want to make. i. Review the module units and identify what methods / criteria can be used to do
this. At least 3 references are required.
ii. From the review, choose the methods / criteria that are relevant for your changes and organization.
iii. Evaluate all proposed 3 changes, using the same evaluation methods / criteria, and from your analysis choose the change that you will implement.
Decide upon the approach you will take to manage and implement the change by putting forward a case for using both Radical Change and Continuous Improvement as the
means for delivering the required improvements for the organisation, identifying the benefits and disadvantages of using each method. i. Review the literature on
Change and identify what criteria you could use to identify which improvement method should be used. At least 3 references are required
Recommend your choice of improvement method(s), giving reasons for your choice. Radical Change, Continuous Improvement, or both, and why? Assessment Grading In
completing the assessments, you need to demonstrate all of the following skills: ??Application of academic concepts ??Critical awareness and analysis ??Synthesis
and presentation of key ideas ??Evaluation of complex matters ??Integration of ideas and practice in a cross disciplinary manner ??Presentation (Written) of key
concepts / ideas
When marking this assignment the academics will be looking for the following criteria:
appropriate focus, meeting learning outcomes/assignment criteria.
-developed discussion and a conclusion summarising the
work.
way the assignment has been approached.
accurate, evidence based information to support the arguments made.

In today’s business arena, there is a variety of data available internally (key performance indicators, for example) and externally (industry reports) that companies
can collect that informs and helps them to understand and report on business performance. In turn this helps them to monitor the delivery of strategic priorities and
goals. At the same time, business aspirations to grow, to increase profits and market share and to be better than the competition calls for a focused strategy.
Typical areas of focus for improvement include strategy alignment, marketing practices, organisation and operations, but deficiencies that require attention can often
be well hidden in the companies and within their policies and procedures.
Against this background, business performance has to be seen holistically looking at a variety of facets. This module seeks to introduce students to business
improvement concepts, theories and strategies. This will help them to appreciate the contribution of various business functions within the formulation of business
improvement strategy that leads to enhanced performance.
6LO502 – Improving Business Performance
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Upon completion of this module, students will be able:
To appreciate the contribution of the operations function within the formulation of business strategy To analyse various business situations and recommend improvements
using relevant approaches that meet the business needs
To apply business improvement concepts and theory to scenarios and plan an improvement project
It seeks to do this by exploring a number of facets, including;
Understanding strategy and its numerous aspects Understanding the strategic role and objectives of operations
This unit should take approximately 1 week of study.
Unit 1 – Introduction and Content Overview
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What do we mean by ‘Business Performance’? It means different things to different people depending on their perspective. Business firms deliver different value to
different stakeholders. Measures of business performance include both financial and non-financial aspects.
For a business to be successful, every business owner or manager needs to ensure that their business is operating as efficiently and effectively as possible. Improving
the efficiency and effectiveness of the business requires an understanding of the key drivers within the business and a practical approach to implementing processes
that will optimise these key drivers. The aim of improving performance is to become more efficient, competitive and profitable.
The core of any enterprise is the set of processes that must take place to deliver goods and services that provide value to customers and other stakeholders. To
effectively design and manage business operations requires an appreciation of their strategic importance, an understanding of the human and technical factors that
impact on their effectiveness, and mastery of appropriate analytical techniques. This may be achieved through a structured approach of measuring performance and
identifying where improvements are needed, monitoring and taking appropriate corrective action, increasing efficiency and productivity, etc.
The first stage requires a better and accurate understanding of a firm’s business by measuring overall performance. Activity 1.1
Click the link below to watch a video presentation by and interview with Bernard Marr, CEO and Dean of the Advanced Performance Institute in 2011 that raises important
questions about improving business performance. It is an hour long.
Organisational Performance & Business Success – IMI Alumni Network Event with Bernard Marr – https://www.youtube.com/watch?v=PKaj4WTed5Y
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Having watched the video, what do you take away as the key messages in regard to improving business performance? Is his perspective relevant to all businesses or only
some? Post your view to the discussion board using no more than 100 words and respond to at least two other posts.
This module will focus upon a number of key aspects of business improvement that can lead to company competitive advantage.
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Strategy
Mintzberg (1994) points out that people use ‘strategy’ in several different ways, the most common being:
Strategy is a plan, a ‘how’, a means of getting from here to there. Strategy is a pattern in actions over time; for example, a company that regularly markets very
expensive products is using a ‘high end’ strategy. Strategy is position; that is, it reflects decisions to offer particular products or services in particular markets.
Porter (1996) argues that strategy is about competitive position, about differentiating yourself in the eyes of the customer and about adding value through a mix of
activities different from those used by competitors. This will be discussed further in Unit 2. The Strategic Role and Objectives of Operations
Slack, Chambers and Johnston et al (2007) suggest that the role of the operations function means something beyond its obvious responsibilities and tasks – it means the
underlying rationale of the function, the very reason that the function exists. The three roles for operations management are as:
The implementer of business strategy. The supporter of business strategy. The driver of business strategy.
This will be discussed further in Unit 3. The Role of Systems Thinking
Systems thinking is a discipline for seeing wholes. It is a framework for seeing interrelationships rather than things, for seeing patterns of change rather than
static snapshots (Senge 1990). In simplest terms, systems thinking can be defined as a way of looking at a system, such as a business process, as a whole in order to
understand and solve complex problems. This will be discussed further in Unit 4. Understanding Business Needs
Understanding business need is one of the most fundamental aspects of analysis leading to business improvement. This must include understanding the needs of all
stakeholders and importantly the needs of the customer.
This will be discussed further in Unit 5. Identifying the Need for Change
An organisation identifies necessary improvements and therefore changes through the use of a variety of tools and metrics. It must then decide what approach it will
take to change. These considerations, approaches and processes will be discussed further in Unit 6. Quality Initiatives
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The Chartered Quality Institute reports that quality is essential in planning for performance improvement as well as an area of competitive advantage. Quality is the
most important tool for competitive advantage among UK manufacturers. The latest survey of manufacturers found that 48% of companies focus on quality as one of their
main areas for competitive advantage, compared with 17% that compete on price (Nass, 2014). Quality initiatives will be discussed further in Unit 7. Prioritisation of
Improvements
Managers can rely on gut instinct to make important decisions, which often leads to poor results. On the contrary, companies benefit when decisions about
prioritisation engage evidence and logic. Organisational business objectives play a key role because business objectives should be the driving force in improvement
efforts by providing the necessary context to guide prioritising improvement actions. Prioritisation of improvements will be discussed further in Unit 8. Project
Management and Risk
Project management is a continuing process. The project initiates as an idea in response to an identified need, then takes a conceptual form and eventually has enough
substance so that key decision-makers select and resource the project as a means of executing elements of a strategy (Cleland and Ireland 2002, p. 44). Project
management and risk will be discussed further in Unit 9.
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Cleland, D.L. and Ireland, L.R. (2002) Project Management: Strategic Design and implementation, New York: McGraw-Hill Professional.
Mintzberg, H. (1994) The rise and fall of strategic planning. New York: Basic Books.
Nass (2014) Backing Britain: A Manufacturing Base for the Future. London: EEF
Porter, M. (1986) Competitive strategy. Boston: Harvard Business School Press.
Porter, M. (1996) What is strategy? Harvard Business Review,74(6) pp.61-78.
Senge, P. (1990) The fifth discipline: the art and practice of the learning organization. New York: Doubleday Currency.
Slack, N., Chambers, S. and Johnston, R. (2007) Operations management. 5th edn. Harlow: Pearson Education.
CQI (2015) Chartered Quality Institute [Online]. Available at: http://www.thecqi.org/Knowledge-Hub/ (Accessed: 29 May 2015)
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In this unit, students will study and examine definitions of strategy as applied to the business world. This will entail considering the role and importance of
strategy both generic and competitive to business success. The unit will examine three core aspects of strategic business functions that collectively help drive a
business forward, namely marketing, operations and finance. Importantly, students will also understand not only the concepts and theories but their application through
understanding strategic planning tools.
The unit should take approximately 1 week of study.
Unit 2 – Understanding Strategy
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The term ‘strategy’ is widely used in business today, with a variety of connotations and interpretations.
A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. When choosing a
strategy, firms make choices among competing alternatives as the pathway for deciding how they will pursue strategic competitiveness. In this sense, the chosen
strategy indicates what the firm will do as well as what the firm will not do (Johnson, Scholes and Whittington 2008, p. 4). Strategy is a plan for interacting in a
competitive environment to achieve your intended goals (Price 2004, p. 86)
Johnson, Scholes and Whittington (2005) define strategy as the direction and scope of an organisation over the long term, which achieves advantage in a changing
environment through a configuration of its resources with the aim of fulfilling stakeholder expectations. This involves the interplay of three elements.
Figure 2.1 The Interplay of Three Elements
Strategy literature dictates that enterprises ‘must actively plan for the future’ to compete effectively and survive (Ennis 1998, p. 54).
Definitions will generally share some key elements, such as:
A plan for the future Setting a goal and the steps to reach it A method of facing competition A mission A path A set of integrated decisions A battle plan
What these definitions have in common is an orientation towards the future, a sense of deliberate action, and, to some extent, a notion of competitive rivalry. They
correspond fairly well with the dictionary definition, which gives the origin of the word as the Greek strategos, or ‘the art of the general’.
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The world is constantly changing and resources are becoming more and more scarce. That alone makes business organisations a non-stop changing mechanism finding and
innovating tools to counter these constant changes. In addition, these changes put more pressure on global organisations to compete efficiently, have a vision to
innovate and satisfy all stakeholders at the same time.
Any business must ask itself three fundamental questions in determining its path towards success.
1. What is the present situation? 2. Where does the company need to go from here? Business(es) to be in and market positions to stake out Buyer needs and groups to
serve Direction to head 3. How should it get there?
A company’s answer to ‘how will we get there?’ is its strategy. Strategic choices about the ‘how’ are based on
Trial and error Organisational learning about what has worked and what has not worked Management’s appetite for taking risks Managerial analysis and strategic thinking
about how best to proceed given market conditions and a company’s circumstances
Grant (2008, p. 26) suggests that business strategy performs a number of roles that collectively work together to maximise success as part of a business management
process.
Strategy as Decision Support
Simplifies decision-making by constraining the range of decision alternatives considered, and by acting as a ‘rule of thumb’ that reduces the search required to find
an acceptable solution to a problem
Permits the knowledge of different individuals to be pooled and integrated Facilitates the use of appropriate analytical tools
Strategy as a Coordinating Device
Acts a communication device Acts as a forum for the exchange of views and for consensus to be developed Acts as a mechanism to enable consistent progress to be made
Strategy as a Target
Establishing a firm’s direction Setting aspirations that can motivate and inspire the workforce
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Business strategy is assumed to be a more or less autonomous factor, determined mainly by market issues and the preferences of top management.
Strategy is also a hierarchical concept that takes place at three different levels: corporate, business and functional. These levels correspond with the activities of
managers in different parts of the organisation.
Corporate strategy is the set of explicit or implicit decision rules that determines what business(es) a firm will be in and not be in, and how it will allocate
resources among them. Typically located at the headquarters, corporate strategy determines which industries the firm will compete in and which ones it will exit.
Corporate strategy also has to do with how the corporation allocates both financial and human resources among its various businesses.
Business strategy is how a firm develops and sustains a competitive advantage within an industry. Typically located at the business unit or division level, it
determines how a company will compete within a given industry and how it will position itself such that it outperforms its rivals.
Functional strategy is the set of decisions made in marketing, operations, finance, research and development, and human resources that supports the business strategy.
So, while the marketing people make pricing, product, promotion, and distribution decisions (the ‘four Ps’ of the marketing mix), operations people are making
decisions about facilities, capacity, inventories and work flow; financial people are managing debt, receivables, equity issues and the like; research people are
determining the balance between basic and applied research; and human resources executives are deciding on recruitment, pay and promotion policies.
Figure 2.2 The Integration of Coporate, Business Level and Functional Strategy
The challenge is to weave all these decisions into a coherent whole in a way that creates competitive advantage. In order to do this, it is important to understand the
details of the unit’s business strategy. Activity 2.1
Read the following article by McKinsey that discusses the findings of a 2011 research project.
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Creating more value with corporate strategy: McKinsey Global Survey results.
Having read the article, consider whether you agree or disagree that strategic planning is essential to improving business longevity. Post your view to the discussion
board using no more than 100 words and reply to at least two other posts.
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A business strategy is built on a set of functional strategies, representing the competitive tools that a company employs to compete in a given industry. One way to
identify a business strategy is simply to first go through each of the functional areas and identify what pattern of decisions have been made in each, as follows.
Marketing Strategy
What products or services are being sold by the corporations, to whom and where (in what geographic areas) are they being sold? How does the company’s price compare
with that of the rest of the industry? Is the company a price leader, or does it tend to match the prices set by others? What are the company’s promotion and
distribution strategies? Operations Strategy
Here, management should consider the question of how it transforms inputs into outputs for the marketplace. For example, what kinds of facilities does the company use?
Are they concentrated in one location, or are they dispersed over a broader area? What is the company’s capacity strategy – does it build capacity in anticipation of
demand, or does it wait until there is a backlog of orders before adding capacity?
Is the firm’s product or service made to order, or are inventories expanded to serve demand as it occurs? Does it source most materials in-house, or does it
subcontract much of its production? Financial Strategy
Although many firms are fairly explicit about the marketing and production strategies that they follow, some of these same firms are vague when it comes to
articulating their financial strategies. Usually, this is because a firm just starting its operations pays attention to cash flow and meeting the payroll, but fails to
pay close attention to its balance sheet. The identification of the financial strategy can help to assess how the firm is managing its financial resources. Activity
2.2
Follow this link that will take you to a case study of the marketing strategy of Adidas during the 2012 Olympic Games. At the end of the case study there are four
questions. Consider an answer to questions 3 and 4 only. Post a summary of your answer to the discussion board and reply to at least two other posts.
Adidas and the 2012 Olympic Games
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Although the purpose of strategic planning is straightforward, to outline where an organisation wants to go and how it’s going to get there is complex and dynamic.
Companies use a wide variety of strategic planning and analytical tools to improve performance and aid growth. Planning and analytical tools in essence are mental
approaches and procedures to apply to develop effective strategic plans. Vision
Ireland, Hoskisson and Hitt (2012) posit that vision is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve. Thus, a vision
statement articulates the ideal description of an organisation and gives shape to its intended future.
Gallo (2010) contends that one of the reasons that Apple is so innovative is due to the late Jobs’ vision for the company. She suggests that he thought bigger and
differently from most people – she describes it as ‘putting a dent in the universe’. To be innovative, she explains that one has to think differently about their
products and customers – ‘sell dreams not products’ – and think differently about the story to ‘create great expectations’.
Ireland et al. (2012) argue that it is also important to note that vision statements reflect a firm’s values and aspirations and are intended to capture the heart and
mind of each employee and, hopefully, many of its other stakeholders. A firm’s vision tends to be enduring while its mission can change with new environmental
conditions. A vision statement tends to be relatively short and concise, making it easily remembered. Examples of vision statements include the following:
‘Our vision is to be the world’s best quick service restaurant.’ (McDonald’s) ‘To make the automobile accessible to every American.’ (Ford Motor Company’s vision when
established by Henry Ford) Mission
The vision is the foundation for the firm’s mission. A mission specifies the business or businesses in which the firm intends to compete and the customers it intends
to serve (Kemp and Dwyer 2003).
Siciliano (2008) argues that a firm’s mission is more concrete than its vision. However, similar to the vision, a mission should establish a firm’s individuality and
should be inspiring and relevant to all stakeholders.
Together, the vision and mission provide the foundation that the firm needs to choose and implement one or more strategies. The probability of forming an effective
mission increases when employees have a strong sense of the ethical standards that guide their behaviours as they work to help the firm reach its vision (Davis et al
2007).
Examples of mission statements include the following:
‘Be the best employer for our people in each community around the world and deliver operational excellence to our customers in each of our restaurants.’ (McDonald’s)
‘Our mission is to be recognized by our customers as the leader in applications engineering. We always focus on the 14
activities customers desire; we are highly motivated and strive to advance our technical knowledge in the areas of material, part design and fabrication technology.’
(LNP, a GE Plastics Company)
McDonald’s mission statement flows from its vision of being the world’s best quick service restaurant. LNP’s mission statement describes the business areas (material,
part design and fabrication technology) in which the firm intends to compete.
Some believe that vision and mission statements provide little value. Raman (2009, p. 4) contends that, ‘Most vision statements are either too vague, too broad in
scope, or riddled with superlatives’.
Vision and mission statements that are poorly developed do not provide the direction a firm needs to take for appropriate strategic actions. A firm’s vision and
mission are critical aspects of the strategic inputs required to engage in strategic actions that help to achieve strategic competitiveness and earn above-average
returns. Therefore, firms must accept the challenge of forming effective vision and mission statements (Ireland, Hoskisson and Hitt 2012, p. 18).
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SWOT Analysis
The SWOT analysis is a tool used in strategic planning to identify and, ultimately, prioritise the organisation’s strengths, weaknesses, opportunities and threats. In
fact, SWOT is an acronym that stands for these elements. The process involves a brainstorming session where participants create a list for each of these areas based on
previously gathered data and information. Once the lists are created, a ranking process is used to prioritise the items so that the top items in each category can be
used to provide a basis for the development of objectives, strategies and tactics.
Figure 2.3 SWOT Analysis
Image Source: Flickr (Accessed on 01.06.2015)
PESTLE Analysis
PESTLE analysis is an audit of an organisation’s environmental influences with the purpose of using this information to guide strategic decision-making. The assumption
is that if the organisation is able to audit its current environment and assess potential changes, it will be better placed than its competitors to respond to changes.
To help make decisions and to plan for future events, organisations need to understand the wider ‘meso-economic’ and ‘macro-economic’ environments in which they
operate. (The meso-economic environment is the one in which we operate and have limited influence or impact, while the macro-environment includes all factors that
influence an organisation but are out of its direct control.)
Figure 2.4 PESTLE
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Image Source: CIPD (Accessed on 01.06.2015)
Porter’s Five Forces Model
Michael Porter developed and introduced his Five Forces Model in 1980 in his first book, Competitive strategy. The model provides a basis for companies engaged in
strategic planning to consider the critical forces that are impacting it. These forces include existing competition between suppliers, the threat of new entrants to
the market, the bargaining power of buyers, the power of suppliers and the threat of competitive products or services.
Figure 2.5 Five Forces Module Diagram Example
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Image Source: Concept Draw Samples (Accessed on 01.06.2015)
Activity 2.3
Follow this link to listen to a video of Michael Porter talking about the five forces that shape strategy and their contemporary relevance to business success. Towards
the end of the interview, Porter says that ‘ultimately, strategy is about aligning resources’. Do you agree? Share your views on the discussion board and respond to at
least two other posts.
Balanced Scorecard
The balanced scorecard is a method used to monitor the implementation and effectiveness of strategic plans. Developed by Norton and Kaplan in 1996, it is a way for
organisations to track progress on strategic planning goals across various categories that are balanced against each other to ensure appropriate focus across all
areas. It contains four major perspectives: financial, business processes, learning and growth and customers. Within these areas, managers identify key performance
metrics the organisation will track.
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Figure 2.6 The Balanced Scorecard
Image Source: The Agile Executive (Accessed on 01.06.2015)
The Financial Perspective
This perspective reflects a concern that the organisation’s activities contribute to improving financial performance in the long and short term. It includes
traditional measures such as net income and return on investment. The Business Process Perspective
This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether
its products and services conform to customer requirements (the mission). The Learning and Growth Perspective
This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self- improvement. In a knowledge-worker
organisation, people – the only repository of knowledge – are the main resource. The Customer Perspective
Recent management philosophy has shown an increasing realisation of the importance of customer focus and customer satisfaction in any business. These are leading
indicators because if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus
a leading indicator of future decline, even though the current financial picture may look good. Competitive Analysis
An in-depth analysis of a firm’s competition is an important component of improving business performance. A competitive analysis allows firms to assess their
competitor’s strengths and weaknesses and implement effective strategies to improve competitive advantage.
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An in-depth competitive analysis will provide a company with the following:
An understanding of how their existing and potential customers rate the competition. A positive identification of their competitor’s strengths and weaknesses. A
mechanism to develop effective competitive strategies in their target market. Supply Chain Analysis
Supply chain analysis is an important tool to determine the composition of clusters in a region. A thorough supply chain analysis and mapping exercise will show the
niche industries and companies within the cluster that are present in the region or, more importantly, the niches and companies that are absent in the regional supply
chain. These are referred to as ‘gaps’ in the supply chain. These gaps represent companies that currently do not have a presence in a region, but that are important
facets of a fully formed cluster. Value Chain Analysis
Value chain analysis is a useful tool for working out how you can create the greatest possible value for your customers. Value chain analysis helps you identify the
ways in which you create value for your customers, and then helps you think through how you can maximise this value: whether through superb products, great services or
jobs well done.
Based upon Porter’s value chain model (see figure 1 below), value chain analysis is a three-step process:
1. Activity Analysis: First, you iden