2.8 THE EFFECT OF CHANGE ON STAKEHOLDERS

Question 1

WHAT IS THE EFFECT OF CHANGE ON OWNERS?

Answer 1

• Owners often responsible for making major decisions associated with change
• Play crucial role in ensuring change is unsuccessful
• May initially suggest the change and usually have final say on how transformation will occur
• Bigger impact on sole-trader than shareholders
  POSITIVE EFFECTS
• Increased return on investment and greater financial security.
• Opportunity to use leadership skills to connect with employees and develop stronger relationships.
• May be perceived more positively by employees if change implemented successfully.
  NEGATIVE EFFECTS
• Increased workload can lead to stress which may impact on owners wellbeing.
• May experience personal and financial implications if business change is unsuccessful.
• May be resented if employee roles are made redundant or significantly changed, negatively impacting corporate culture.

Question 2

WHAT IS THE EFFECT OF CHANGE ON MANAGERS?

Answer 2

• Managers can be in charge of the entire business or an area of management
• Managers are often responsible for leading the change, communicating to employees, delegating responsibilities and dealing with resistance to change.
• Senior managers will often need to respond to other stakeholders, such as shareholders
• E.g when CEO Marissa Mayer, made some radical changes at Yahoo, some major stakeholders disagreed with her decisions. As a result, some notified her publicly that they would work to replace her if things didn’t work out the way she planned.
• It is often senior managers that need to respond to media attention, which can put pressure on their position
• During times of radical change middle managers may be affected - often made redundant for cost cutting, etc.
  POSITIVE EFFECTS
• Opportunities to develop new skills or advance careers may be created by change.
• Financial or non-financial rewards provided if business change is successful.
• Increased authority and responsibility can improve a manager’s skills.
  NEGATIVE EFFECTS
• Increased workloads can lead to stress which may impact a managers wellbeing.
• Loss of job and financial security if business change is unsuccessful.

Question 3

WHAT IS THE EFFECT OF CHANGE ON EMPLOYEES?

Answer 3

• Employees complete allocated tasks for remuneration
• Usually most affected by change as they are the ones that carry out the new processes
• Fear and anxiety → job security, change roles, effectiveness, threat to routine
• Redundancy → loss of purpose/passion. monetary concerns
• Some employees may embrace change → increase productivity, new responsibilities, boost morale, new location etc.
• This change needs to be managed well
  POSITIVE EFFECTS
• New opportunities and responsibilities can improve employee job satisfaction.
• May build long term job security and improve employee satisfaction if business change is successful.
• May require training to learn new skills, helps to improve future employability.
  NEGATIVE EFFECTS
• May need to develop new complex and knowledge to keep their job which can increase stress levels.
• May lose their job and financial security due to change.

Question 4

WHAT IS THE EFFECT OF CHANGE ON CUSTOMERS?

Answer 4

• Customers are people who purchase goods or services from a business
• Business change can have the following impacts on customers:
  
  • Better quality products and/or lower prices
  • Meet customer needs/desired, e.g innovation of new technologies with the introduction of internet banking
  • Customer dissatisfaction - e.g Carlton United Brewery in 2009, change the recipe of VB, in order to reduce excise tac and keep price affordable. Sales declined and they returned to the original recipe in 2013.
  • April 2016 - Arnott’s shapes changed the recipe for their core flavours - consumer backlash caused them to shift back.
  • Consumer research should be conducted prior to change
    POSITIVE EFFECTS
• Better product or service quality can increase customer satisfaction.
• Reduction in the price of goods or services can increase customer satisfaction.
• The practice of CSR may increase customer satisfaction.
  NEGATIVE EFFECTS
• Lowering quality to save on costs of production may frustrate customers and reduce satisfaction.
• Increasing the price of goods or services may frustrate customers and reduce satisfaction.
• Discontinuing or changing a good or service may decrease customer satisfaction especially if it fails to meet their needs.

Question 5

WHAT IS THE EFFECT OF CHANGE ON SUPPLIERS?

Answer 5

• Suppliers sell materials and resources to other businesses for their production
• Businesses cannot survive without suppliers, and suppliers cannot survive without businesses
• E.g introduce technology → increases efficiency of production → requires supplies at a faster rate → suppliers need to keep up with the increased rate
• Changes in pricing strategies, marketing campaigns, or breaking into new markets
• Increase or decrease in demand
  POSITIVE EFFECTS
• May increase the amount of resources demanded by businesses which can increase sales for the supplier.
  NEGATIVE EFFECTS
• May decrease sales if businesses decide to switch to a different supplier or lower their volume of orders.
• May require adjustments in processes and suppliers offered to meet the requirements of business change.

Question 6

WHAT ARE THE EFFECTS OF CHANGE ON THE GENERAL COMMUNITY?

Answer 6

• Businesses operate in local areas and therefore are part of the community
• Employ local people and spend money on local products and services
• Change can negatively impact communities (e.g job losses and increased unemployment rates) or stimulate local communities (e.g expand and move into new locations)
• Can positively impact environment if change involves reducing waste. Can negatively impact environment if change involves switching to overseas supplier.
  POSITIVE EFFECTS
• Creation of more jobs can increase employment rates and improve society’s well being
• Increases customer traffic and sales of surrounding businesses if change involves opening or expanding into new areas.
• Greater ability to make donations to charity and contribute to social causes if business change is successful.
  NEGATIVE EFFECTS
• Loss of jobs may increase unemployment rates and decrease society’s wellbeing as poverty levels will rise.
• Decreases customer traffic and sales of surrounding businesses if change involves shutdown or relocation.