3.6 - managing change Flashcards
What are some internal factors taht can lead to change in a business?
- A change in the organisational size (size of the business)
- new ownership
- poor business performance
- transformational leadership
How can a change in organisational size affect a business?
- An increase in a business’ organisational size could mean that theres an increase in the number of workers
- An increase in the number of workers can lead to reduced production time and economies of scale
- Growth could effect external stakeholders such as shareholders or other investors
- Cash flow is usually affected during periods of growth
How can a change in ownership affect a business?
- New owners will often have their own beliefs about the direction the firm should take and the way it should ba managed
- stakeholders that are negatively affected by a change in ownership might resist the change
- A change in ownership can cause economies of scale to occur, since the new owners of the firm could grow the business by increasing investment into machinery or in the recruitment of staff, therefore increasing the production levels
What are some of the reasons why a business might experience a change in ownership?
- The firm could transition from being a sole trader to a partnership
- a private limited company could become a public limited company
- the owners could retire and sell or gift the business to new owners
- ownership can change as a result of a takeover or merger
How can poor business performance affect a business?
- Poor business performance can reduce competitveness. Lower sales than expected might mean thatthe business has to increase iots prices to make up for lower sales volume, and higher prices reduces competitiveness.
- Poor business performance can also negatively impact the productivity of the business, since if a business faces lower sales volume then they may decide to lower the output to save costs
What is a transformational leader?
A transformational leader is an owner or manager who makes large, innovative changes to a firm.
A transformational leader can also change the business’s ethos.
They’ll identify a need and have a vision for change, and will motivate employees to make changes, such as new strategies
How can a transformational leader affect a business?
Transformational leaders are often recruited when a firm had a period of poor performance, since the business often hopes that the leader will improve the competitiveness.
The recruitment of a transformational leader could affect stakeholders.
The firms employees may resist the change
What are the external factors that can cause change in a business?
A manager can use a PESTLE analysis to look at the external factors that may cause change for a business:
- Political
- Economic
- Social
- Technological
- Legal
- Environmental
How can the PESTLE external factors cause change in a business?
- Political: a change in government policy can affect how a firm behaves, such as new legislation restrictions
- Economic: if the economy enters a recession, the amount of disposable income consumers have reduces and a firm may need to reduce prices
- Social: changing social trends can lead to a business needing to alter its product
- Technological: Firms may change their production processes if new technology allows production to be faster or cheaper
- Legal: changes in legislation affect a business
- Environmental: some firms may have to alter production processes due to increaseed environmental impact awareness
How is the market a key external factors that can affect a business?
- A business may need to change its objectives, decide on a new strategy, invest in research and development, or look at its branding strategy to deal with changes in the external market
- New entrants to the market can cause a loss of market share for a business already in the market, and reduce its competitveness
- The removal of a competitor from the market can improve a firms financial performance in the long term as its likely to mean that the firm will have a larger market share
What is change management?
Change management is the proccesses and procedures performed by managers to plan and prepare for changes, carry out the changes, and assess the possible effects of the changes on the business and its stakeholders
What are the key factors that can affect the outcome of change?
- Organisational culture
- The size of an organisation
- The speed
How can organisational culture have an impact on a business’s reaction to change?
- A firms culture can either be open or resistant to change.
- A culture that open to change sees it as a way to improve the firm
- Resistance to change can be displayed either passively or actively
How can the size of an organisation affect how well it reacts to change?
- Communication can be slow and difficult in large firms. Therefore if a change is required in a large business with poor communication, it can be hard to make sure everyone has an understanding of the change
- Change management can also be difficult in small firms, since they may lack the finance, skills, and resources needed for effective change
What are the 2 types of speed for change within a business?
- Incremental change - is gradual and involves lots of small changes over time to minimise disruption
- Disruptive change - is sudden and forces a quick response
Why might certain stakeholders resist change?
- Staff may be resistant to change because they fear that theyll be unanble to develop new skills required
- Suppers may be resistant to change since they may have to alter their existing processes
- Customers might resist change since they might not like new products or services the business puts out
- Shareholders might resist change because of costs or a fear that the change may lead to business failure
What is scenario planning?
Scenario planning is where businesses consider specific events that may happen in the future, and plan how they would operate should one of the events occur
What are some common events businesses prepare for with scenario planning?
- Natural disasters
- Loss of important staff
- IT systems failure
What are some drawbacks of scenario planning?
- Can be expensive and time consuming
- can require specialist knowledge
- the scenario may never happen
How can a business take away the risk that the scenario may never happen?
A firm may carry out risk assessment as the first step in scenario planning.
Risk assessment identifies the risks associated with an event and any expected consequeneces of the event.
A business then looks at the probaibility of specific events occuring and devlops plans for those with the highest possibilities or detirmental effects
What is risk mitigation?
Risk mitigation is part of planning, and it looks at reducing the probability of a risk to a business occuring, or reducing the negative effect once a risk has been realised
What are the common forms of risk mitigation?
- Risk acceptance - when the business decides to accept the risk without creating a plan, aims to lower costs
- Risk avoidance - avoiding the risk altogether
- Risk limitation - reduces the impact of the risk
- Risk transference - when the risk is transferred to a third party
What is continuity planning?
Continuity is similar to scenario planning but is much more general.
Continuity planning aims to mitigate the risks and keep the firm working by providing a recovery plan should any unspecified incidents occur
What is succession planning?
Succession planning involves the identification and devlopment of staff members that would be able to fill key roles, to allow the business to mitigagte the risks from the loss of a key member of staff.
