3.6.1 Cause & Effects Of Change

Question 1

What are some internal causes of change?

Answer 1

• A change in business size- Businesses are likely to grow organically as they sell more products
  They may create or expand functional areas, open new premises or introduce new levels of supervision
  Increase in size may also come about when a firm merges or takes over another business
• Poor performance- A period of poor performance may mean that a business makes changes to its leadership team in order to pursue a new direction
• New ownership- A change in ownership can bring significant change to the overall aim & objectives of business
  New owner is likely to bring new policies, attempt to make changes to a businesses culture & likely to bring key personnel to implement these changes
• Transformational leadership- In some cases change can only be brought about by a transformational leader with a new strategic direction & vision for the business
  Extensive changes are likely to be made to the businesses aims, objectives, structure & culture
  -Business restructuring- Changes to the structure of a business may be required as a result of expansion or contraction of the business
  Restructure may also be needed when a business enters a new market, changes its scope of operations or when it integrates with another business

Question 2

What are some external causes of change? (PESTLE)

Answer 2

Political change- Periodic change in political leadership can require both short-term & longer-term business response
Economic Change- Economic growth or contraction can impact on demand for goods & services & can be difficult to predict
Social change- Long-term changes to consumption habits as a result of social change can require a business to refocus business strategy
Technological Change-Technological change has been particularly rapid over the last few decades, creating significant opportunities but, also, a need for businesses to adapt
Legal Change- Changes to the laws affecting businesses often accompany political change & require adaptation and compliance- E.g. the 2007 law banning smoking in indoor public spaces meant that many hospitality businesses- pubs & restaurants were required to make adaptations to their premises such as constructing all-weather outdoor facilities
Environmental Change- Environmental change is increasingly associated with political change & subsequent changes to the law
In recent years numerous environmental issues have emerged &, increasingly, consumers expect businesses to respond to their concerns, even if they are short-lived

Question 3

What are the possible effects of change?

Answer 3

• Competitiveness
• Productivity
• Financial Performance
• Stakeholders

Question 4

What possible effects of change are there on competitiveness?

Answer 4

• Change as a result of some internal factors (e.g. following poor performance or the arrival of a new leader) can be rapid & can lead to swift improvements in competitiveness
• Change as a result of external factors is more likely to be gradual & involve a business carefully selecting & pursuing an appropriate long-term competitive strategy

Question 5

What possible effects are there of change are there on productivity?

Answer 5

• In the short-term, as change is being implemented & 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 & possibly improve , especially if new technology is part of the change
• During periods of external change, businesses may endure a period of unstable levels of productivity & must take steps to manage capacity utilisation & unit costs

Question 6

What possible effects are there of change on financial performance?

Answer 6

In the short-term, the implementation of change can be very expensive for several reasons:
- Organisational restructure may involve significant redundancy payments as well as recruitment & training costs
- Market research & product development require investment
- Attracting transformational leadership to key roles will require attractive salaries to be offered
- Public relations & promotional activity may be needed, especially where change is implemented a result of poor performance
- New strategies are likely to involve capital expenditure

In the longer term, financial performance is likely to improve as change becomes the new way of working & teething problems are overcome

Question 7

What possible effects are there of change on stakeholders?

Answer 7

• Change can have predictable as well as less obvious impacts on the range of stakeholders
• Some changes such as seasonal fluctuations or cyclical economic factors can often be planned-for & their impacts on stakeholders considered in advance

E.g. increased orders for barbecue products are very likely to be placed during the summer

A sudden ‘cold snap’, on the other hand, is likely to be difficult for many fashion retailers as they operate on a seasonal basis

Significant long-term change is likely to involve a wide range of stakeholders at some level