3.6.1 - Causes & Effects of Change

Question 1

State the 5 Causes of Change in Business

Answer 1

• Changes in Organisational Size
• Poor Business Performance
• New Ownership
• Transformational Leadership
• The Market and Other External Factors (PESTLE)

Question 2

Explain Cause of Change - CHANGES IN ORGANISATIONAL STRUCTURE

Answer 2

• Business Grows in Size if Expands Internationally
• Causes Issues :
• Maintaining Company Culture
• Motivating Staff During Expansion
• Increased Labour Costs with Hiring New Staff
• Training New Staff

Question 3

Explain Cause of Change - POOR BUSINESS PERFORMANCE

Answer 3

• may Happen if Business Experience Poor Sales, Low Profits, Slow Expansion
• Cause Issues :
• Business will Need New Objectives and a New Direction
• will Need some New Strategies (Ansoff’s)
• Business will Need to Look at what’s Necessary to Improve Performance -> May Mean Delayering or Redundancies

Question 4

Explain Cause of Change - NEW OWNERSHIP

Answer 4

• may Happen if Business has been Bought or Merged with Another Business or there’s Been a Management Buyout
• Cause Issues :
• may be Significant Role Duplication (e.g. two Marketing Managers) –> means Need to Redunancies
• Class of Culture –> Communication Issues

Question 5

Explain Cause of Change - TRANSFORMATIONAL LEADERSHIP

Answer 5

• may Happen if New Leadership is Brought Into the Organisation that Seeks to Change it
• Cause Issues :
• may Need to Reinvent Itself to Achieve Competitive Advantage
• Encourages Development of New Ideas and Culture

Question 6

Explain Cause of Change - Market and External Factors (PESTLE)

Answer 6

• may Happen if Been New Entrants to the Market (Porter’s 5 Forces) or Changes in Market (e.g. energy Market Deregulation)
• Causes Issues :
• Business may Need to Respond by Increasing R&D Budget to Introduce more Innovative Products to Portfolio

Question 7

State the 4 Possible Effects of Change on a Business

Answer 7

• Competitiveness
• Productivity
• Financial Performance
• Stakeholders

Question 8

Explain Effect of Change in Ownership - COMPETITIVENESS

Answer 8

• Impact on Competitiveness is Determined By How Companies Integrate and Complement One Another
• However, Significant EOS Come from Two Firms Merging

Question 9

Explain Effect of Change in Ownership - PRODUCTIVITY

Answer 9

• Productivity may Rise as a Result Of a Merger, But in Short Term is Likely that Business Operations will be Disrupted as the 2 Firms Work Out How to Get Along and Integrate All Aspects of Business

Question 10

Explain Effect of Change in Ownership - FINANCIAL PERFORMANCE

Answer 10

• Aquisitions can be Very Expsenive , if Venture Fail –> can Lead to Huge Losses being Incurred by the Buyer
• However, Acquisitions are Good for Share Prices and the Announcement of an Acquisition or Merger can Increase Demand for Comapny’s Stock

Question 11

Explain Effect of Change in Ownership - STAKEHOLDERS (Internal)

Answer 11

• Employees may Feel Unsure About Future
• Managers may be Worried about Duplicate Roles and Redundancies, or see Positive with New Opportunities

Question 12

Explain Effect of Change in Ownership - Stakeholders (External)

Answer 12

• Shareholders may be Reluctant to Invest while There’s a Period of Change Happening, Until Circumstances are More Settled
• Customers may be Delighted with New Range of Products and Improved Quality