3.6 managing change Flashcards
businesses operate in…
a continuously changing business environment
which 2 broad factors affect businesses?
internal factors - business growth, new business ownership, internal restructuring
external factors - changes to the market, technological advancements
what are causes of change?
-chances in organisation size
-poor business performance
-new ownership
-transformational leadership
the market and other external factors (PESTLE)
causes of change: changes in organisational size
a business will change as it grows
(organically - selling more products)
(inorganically - mergers, takeovers)
↳ create or expand functional areas, open new premises
↳ workforces, resources and capital will need to be integrated and systems are likely to need to be streamlined
a business will also change and become smaller as a result of divestment or market pressures
↳ may require redundancies & the sale of assets
↳ workers may need to transfer to other parts of the business
what is divestment?
the process of selling assets or discontinuing investments
causes of change: poor performance
-a dip in sales or loss of profit could lead to changes in…
-personnel
-product design
-business operations
-leadership team
the pace of changes to combat poor performance:
change following poor performance needs to be swift to avoid problems such as the potential loss of customers and reputational damage
causes of change: new ownership
a change in ownership can significantly change the overall aim and objectives of the business
↳ new policies, changed culture and key personnel to implement changes
the move from Ltd to Plc is also a significant step, the company becomes influenced by public share ownership and stock market forces.
causes of change: transformational leadership
-leaders make change happen
- they set a vision and direction for the company and ensure people are on-board
-new leaders will assert their own ideas and strategy
-extensive changes are likely to be made to the businesses aims, objectives, structure and culture
causes of change: changes in the market (external)
a new competitor may enter the market or existing competitors may change their strategy
causes of change:
political change -PESTLE (external)
change in political leadership can affect legislation & require both short-term and longer-term business response
causes of change:
economic change -PESTLE (external)
economic growth or contraction can impact on demand for goods and services and can be difficult to predict
→ for example, high inflation can lead to decreased consumer confidence & more spending on necessities
causes of change:
social change -PESTLE (external)
long-term changes to consumption habits as a result of social change can require a business to refocus business strategy
→ for example, the UK’s increasingly diverse population means that food retailers now sell a wide range of world foods and related products
causes of change:
technological change -PESTLE (external)
technological change has been particularly rapid over the last few decades, creating significant opportunities but, also, a need for businesses to adapt
causes of change:
legal change -PESTLE (external)
changes to the laws affecting businesses often accompany political change and require adaptation and compliance
causes of change:
environmental change -PESTLE (external)
-environmental change is increasingly associated with political change and subsequent changes to the law
-in recent years numerous environmental issues have emerged and, increasingly, consumers expect businesses to respond to their concerns, even if they are short-lived
which aspects of the business can change affect?
-competitiveness
-productivity
-financial performance
-stakeholders
what are the effects of change on competitiveness?
-change as a result of external factors is likely to be gradual and involve a business carefully selecting and pursuing an appropriate long-term competitive strategy
-change as a result of some internal factors (e.g. following poor performance or the arrival of a new leader) can be rapid and can lead to swift improvements in competitiveness
-change is driven by the need to improve or maintain competitiveness
overall effect of change on businesses competitiveness:
research suggests that change has an overall positive effect on business competitiveness when it brings management and engaged employees together and their efforts are coordinated
how can change affect productivity?
-change may come about through new technology or new ways of working (staff training, organisation structure)
-a driver of change will always be the aim of increasing productivity and improved efficiency
-during periods of external change, businesses may endure a period of unstable levels of productivity and must take steps to manage capacity utilisation and unit costs
the effects of change on productivity in the short & long term:
in the short-term, as change is being implemented and employees get used to new processes, surroundings, leadership or a new product, productivity is likely to be reduced
once changes are embedded, productivity is likely to return to earlier levels and possibly improve , especially if new technology is part of the change
how can change affect financial performance? (short term)
in the short-term, the implementation of change can be very expensive for several reasons
↳ organisational restructure may involve redundancy payments, recruitment & training costs
↳ market research and product development require investment
↳ PR and promotional activity may be needed, especially where change is implemented due to poor
performance
↳ new strategies are likely to involve capital expenditure
how can change affect financial performance? (long term)
financial performance is likely to improve as change becomes the new way of working and teething problems are overcome
how can change affect stakeholders?
-some changes such as seasonal fluctuations or cyclical economic factors can often be planned-for and their impacts on stakeholders considered in advance
-significant long-term change is likely to involve a wide range of stakeholders at some level