Managing change 3.6 Flashcards
What are the 5 internal causes of change for a business?
- A change in the organisational size
- New ownership
- Poor business performance
- Transformational leader
- The market and other external factors (PESTLE)
What effects do these causes have on the business?
- Competitiveness
- Productivity
- Financial performance
- Stakeholders
How positive effect does a change in the organisational size affect a business?
- More workers can be more productive, increasing output
- Higher output means benefit from economies of scale which could lead to them being able to lower prices to be more competitive
- These lower costs could increase profit margins meaning better financial performance
- Lower prices benefits consumers, higher profits benefit shareholders etc
What is the negative effect of a change in the organisational structure?
- A change may lead to less communication between layers of the hierarchy, meaning poorer decision making, reducing productivity
- This may cause diseconomies of scale which may raise costs and lead to a worsening in the financial performance and competitiveness
- If growth is decreases, shareholders may decide not to invest, overtrading may also worsen profits
What are the main reasons as to why a business may see change in ownership?
- Changing the form of the business
- The current owner leaves for any particular reason
- When a shareholder takes control by purchasing majority of the shares in the business
What changes may occur when there is new ownership?
Change in culture, changes in a firm’s aims and objectives, staffing structure etc
Positive effects of a change in ownership?
- New owners may bring in new ideas which could increase growth and market share increasing profits and the financial performance
- The new ideas could be innovative meaning they could generate a usp and be more competitive
- Workers may feel more valued if new owners manage them better, increasing productivity
The negative effect of a change in the ownership of a business
- If growth isn’t managed as well, this could reduce competitiveness to the business resulting in diseconomies of scale reducing profits
What are 3 reasons why a business may be considered to be performing badly?
- lower sales and profits, high costs and slow growth
What are the negative effects of poor business performance?
- Poor business performance means that lower sales are expected, reducing their financial performance
- May have to raise prices to maintain margins which may reduce competitiveness
- Shareholders may pull out of investments or sells shares in the business
- Workers may be demotivated and job insecure
- Fixed costs remain the same so higher costs and less economies of scale
How can poor business performance be recovered?
- Improving quality
- Reducing costs - redundancies, selling assets, external finance
- Changing corp objectives and changing their corporate strategy
What is a transformational leader?
A manager or a leader who makes large, innovative changes to a firm, Can also change the business’s ethos
How may a transformational leader benefit the business?
- They can change objectives so they are more manageable and suit stakeholders better
- ## They could motivate staff to make them more productive to cut costs, making them be in a better financial position and be more productive
What is the effect of a change in the market?
- This may mean a change in the number of competitors in the market which could mean a firm has to lower prices to remain competitive
- Lower prices may reduce financial performance
- Benefitting from a USP could allow them to be competitive
What is scenario planning?
This is where businesses consider specific events that may happen in the future and plan how they would operate should one of these events occur
What are 3 examples of risk to a business
- Natural disasters
- IT system failures
- Loss of key staff
What is a risk assessment?
This is when a business identifies the risks associated with an event and any unexpected consequences of an event. A business may also consider the one that has the highest probability of occurring or will have the most detrimental impact and focus on this
How may a natural hazard be risky to a business?
- Supply chains disrupted, consumers may demand less which may lose business. Therefore a business might create a scenario plan to ensure that they are prepared for any unexpected natural hazards - depending on the businesses situation
How may an IT systems failure be risky to the business?
Modern day and larger businesses have a heavy reliance on IT systems and so, it could have a major impact how the business operates should it fail or be hacked. Loss of files could be dangerous
How may loss of key staff be risky for a business?
Some key staff members are vital when running a business because they know a business very well. Therefore a risk assessment on which workers are most likely going to leave could help the business
What is risk mitigation?
Reducing the risks of something
What are the 4 main forms of risk mitigation?
Risk acceptance, risk avoidance, risk limitation and risk transference
Briefly describe the 4 main forms of risk mitigation
Risk acceptance - Not creating a plan and accepting risk because of the small probability of it happening
Risk avoidance - avoiding the risk altogether
Risk limitation - Whatever the business relies heavily on, ensure back-up plans
Risk transference - negative effects are transffered to a third party
What are the two forms of risk mitigation?
Business continuity planning and succession planning
