3.6.1 Causes And Effects Of Change

Question 1

What are the 6 cause of change in business?

Answer 1

1.) Changes in organisational size
2.) Poor business performance
3.) New ownership
4.) Transformational leadership
5.) The market + other external factors

Question 2

1.) Changes in organisational size

Answer 2

-Business may grow in size, e.g. international expansion.
-Issues the business will face as a result: -Maintaining company culture.
-Motivating staff during the expansion.
-^ labour costs —> hiring new staff.
-Training of new staff.

Question 3

2.) Poor business performance

Answer 3

-May happen if business experiences poor sales, low profits or slow expansion.
-Issues the business will face as a result:
-The business will need new objectives + a new direction.
-The business will need some strategies to compete (Ansoff’s)
-The business will need to look at what’s necessary to improve performance this may mean delayering or redundancies.

Question 4

3.) New ownership

Answer 4

-May happen if the business has been bought or merged with another business.
-Issues the business will face as a result:
-Significant role duplication, so there may be need for redundancies.
-Clash of cultures.
-Issues of communication between the 2 businesses as they change + merge.

Question 5

4.) Transformational leadership

Answer 5

-May happen if new leadership is brought into the organisation + seeks to change it.
-Issues the business may face as a result:
-The business will need to reinvent itself to achieve comp advantage.
-A new business culture which challenges managers to develop new ways of thinking.

Question 6

5.) The market + other external factors (PESTLE)

Answer 6

-May happen if there have been new entrants to the market or due to EU expansion, or changes in the market.
-Issues the business will face as a result:
-The business may need to respond by increasing their research and development budget to introduce more innovative products to their portfolio.
-May need to change the corporate objectives.

Question 7

What are the 4 possible effects of change on a business?

Answer 7

1.) Competitiveness
2.) Productivity
3.) Financial performance
4.) Stakeholders

Question 8

1.) Effect of change on competitiveness

Answer 8

-A business undergoing change may need to:
-Be aware of competitors actions + be prepared to react to them.
-Benchmark with similar businesses to make sure they are keeping up.
-Invest in R&D to keep innovating + bringing new ideas to the market.
-Investigate new + emerging economies (BRIC)

Question 9

2.) Effect of change on productivity

Answer 9

-A business undergoing change may need to:
-Invest in new equipment + machinery.
-Change production methods.
-Change quality management methods.
-Retrain managers so their skills meet the technologies used.

Question 10

3.) Effect of change on financial performance

Answer 10

-A business that is undergoing change may need to:
-Compare sales estimate with available production capacity.
-Budget for necessary increases in staff + capacity.
-Produce new cash flow forecasts.
-Discuss how to raise any extra capital.

Question 11

4.) Effects of change on stakeholders (internal)

Answer 11

-Stakeholders may be affected by change:
-Employees may feel unsure about their future.
-Managers may be worried about duplicate roles + redundancies, or possibly see the change as positive with new opportunities.

Question 12

4.) Effect of change on stakeholders (External)

Answer 12

-Stakeholders may be affected by change:
-Shareholders may be reluctant to invest while there is a period of change happening, until circumstances are more settled with the business.
-Customers may be delighted with the new range of products + improved quality.
-Suppliers may see the change as an opportunity to renegotiate old contracts with more favourable terms.