3.6.1 cause and effect of change

Question 1

causes of change

Answer 1

changes in organisational size
poor business performance
new ownership
transformational leadership
the market and other external factors (PESTLE)

Question 2

possible effects on

Answer 2

Competitiveness
Productivity
financial performance
stakeholders

Question 3

Managing change is the combination of

Answer 3

of activities involved in planning for, implementing, coordinating and monitoring the process of change

Question 4

Change occurs when

Answer 4

a business alters its structure, size or strategy to respond to internal or external influences

Question 5

Change may be necessary to

Answer 5

help a business meet its aims and objectives

Question 6

Change creates

Answer 6

opportunities and threats

Question 7

Directors may have an objective of growth, this can be achieved by:

Answer 7

Organic growth Opening new branches

• New product development inc.
• diversification

Inorganic growth
-Mergers and takeovers

Question 8

An objective of cost minimisation however may require the business to contract, this is known as retrenchment. This can be achieved by:

Answer 8

Internal contraction

• Delayering
• Closing down unprofitable elements

External contraction
-Selling off elements of the business

Question 9

New owners may be the result of

Answer 9

Takeover
Merger 
Management Buy Out (MBO)
Next generation
Newly appointed directors
Flotation on the Stock Exchange

Question 10

Reasons why new owners will want to make changes include:

Answer 10

Own vision or mission
Change in corporate objectives
Cultural differences
Personal leadership style
Make a difference – fresh ideas
Bringing together 2 companies policies and procedures
Turn around poor performance
Self glorification

Question 11

what is Transformational leadership

Answer 11

Leaders with a clear vision who are able to lead others to achieve the extraordinary
-Passionate, energetic and enthusiastic
Inspire others
-Supports every member in a team to achieve their potential as well as the whole group to achieve a successful outcome

Question 12

Four components of transformational leadership:

Answer 12

Intellectual simulation
-Challenges the status quo whilst encouraging creativity

Individualised consideration
-Supportive of and encouraging to all team members

Inspirational motivation
-Shared passion and a clear vision

Idealised influence
-A role model who earns trust and respect

Question 13

positive effects of competitiveness

Answer 13

Closure of less successful competitors.
USP achieved through innovation leading to a competitive advantage.
Favourable economic change to support global competiveness.

Question 14

negative effects of competition

Answer 14

New entrant into the market.
Change in legislation affecting ability to compete.
Dominant business as a result of a merger or takeover.

Question 15

positive effects of productivity

Answer 15

Increased productivity as a result of process innovation.
Technological advancements.
Shared expertise from a merger or takeover.
Technical economies of scale form growth.

Question 16

negative effects of productivity

Answer 16

Teething problems from new machinery.

Reduced capacity utilization as a result of poor economic conditions.

Question 17

positive effects on financial performance

Answer 17

Low interest rates being favourable for highly geared firms.
Less competitive environment leading to rising sales.
Economies of scale as a result of changing size.
Increased profitability from greater efficiency enjoyed as a result of technological change.

Question 18

negative effects on financial performance

Answer 18

Improved availability of information to consumers e.g. internet or legislation.
Greater returns to shareholders from improved profitability