3.6.1 - Causes and effects of change

Question 1

What are the causes of change in business

Answer 1

1. changes in organisational size
2. poor business performance
3. new ownership
4. transformational leadership
5. the market and other external factors (PESTLE)

Question 2

What are the issues faced when organisations change in size

Answer 2

Maintaining the company culture
* Motivating staff during the expansion
* Increased labour costs with hiring of new staff
* Training of new staff

Question 3

What are the issues faced when business perform poorly

Answer 3

The business will need new objectives and a new direction
* The business will need some new strategies to compete (Ansoff’s)
* The business will need to look at what is necessary to improve performance this may mean delayering or redundancies

Question 4

What are the issues faced when there is new ownership

Answer 4

There may be significant role duplication (two marketing managers for example) so there may need to be redundancies
* There may be a clash of cultures
* There may be issues of communication between the two businesses as they change and merge

Question 5

What are the issues faced when there transformational leadership

Answer 5

• The business will need to reinvent itself to achieve competitive advantage
• A new business culture which challenges managers to develop new ways of thinking
• The business encourages the development of new ideas

Question 6

What are the issues faced with the market and other external factors (PESTLE)

Answer 6

• The business may need to respond by increasing their research and development budget to introduce more innovative products to their portfolio
• They may need to change the corporate objectives

Question 7

What are the effects of change

Answer 7

1. competitiveness
2. productivity
3. financial performance
4. stakeholders

Question 8

What are the effects of change on competitiveness

Answer 8

• A business that is undergoing change may need to;

▪ Be aware of competitors actions and be prepared to react to them
▪ Benchmark with similar businesses to make sure they are keeping up
▪ Invest in R&D (research and development) to keep innovating and bringing new products to market
▪ Investigate new and emerging markets e.g. BRIC economies, (Brazil, Russia, India and China) or the expanding EU

Question 9

What are the effects of change on productivity

Answer 9

• A business that is undergoing change may need to;

▪ Invest in new equipment and machinery
▪ Change production methods
▪ Change quality management methods
▪ Retrain managers so their skills meet the new technologies used

Question 10

What are the effects of change on financial performance

Answer 10

• A business that is undergoing change may need to;

▪ Compare sales estimate with available production capacity
▪ Budget for necessary increases in staff and capacity
▪ Produce new cash flow forecasts
▪ Discuss how to raise any extra capital

Question 11

What are the effects of change on stakeholders (internal)

Answer 11

• Stakeholders may be effected by change:

▪ Employees may feel unsure about their future
▪ Managers may be worried about duplicate roles and redundancies, or possibly see the change as positive with new opportunities

Question 12

What are the effects of change on stakeholders (external)

Answer 12

• Stakeholders may be effected by change:

▪ Shareholders may be reluctant to invest while there is a period of change happening, until circumstances are more settled within the business
▪ Customers may be delighted with the new range of products and improved quality
▪ Suppliers may see the change as an opportunity to renegotiate old contracts with more favourable terms