Causes and effects of change 3.6.1

Question 1

What are the 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

What are the possible effects?

Answer 2

• Competitiveness
• Productivity
• Financial performance
• Stakeholders

Question 3

What are the internal causes of change?

Answer 3

This is a change caused by decisions taken by the business itself. These can include:

• Restructuring
• Delayering
• Management
• Expansion

Question 4

What are the external causes of change?

Answer 4

These causes of change are linked to changes in the external environment facing all businesses or businesses in specific markets and/or locations. Examples include:

• Social trends/ attitudes
• Economic conditions
• Laws/regulations
• Technological advances

Question 5

What is restructuring?

What is delayering?

What is new leadership?

Answer 5

When a business is in financial difficulties it may choose (or have) to undergo a “ restructuring “ process. This usually involves changes to the business’s capital structure to reduce the amount of debt, as well as reductions in the scale and scope of the business activities (e.g. closing down business units).

This involves removing one or more layers from the organisational hierarchy, which usually aims to reduce costs and improve decision-making and communication through a flatter organisational structure.

The arrival of new leadership is often followed by a change in business strategy and subsequent changes to the products and markets in which a business operates and how it competes. An attempt to change the organisational culture is also frequently a feature of change instigated by new leadership.

Question 6

What are social trends/ attitudes?

What are economic conditions?

What are laws and regulations?

What are technological advances?

Answer 6

For example the growing resistance by consumers to businesses using single-use plastic in products and packaging.

For example, the economic uncertainty created by Brexit or the growth of protectionism in developed economies.

For example changes to minimum pay requirements (National Living Wage), data protection (GDPR) and restrictions on advertising & selling.

A significant source of external change, particularly through the creation of new business models (e.g. streaming) to challenge existing, established business models.

Question 7

What are the types of change?

Answer 7

• Incremental change
• Step change
• Disruptive change

Question 8

What is incremental change?

Answer 8

• These are the many small changes that businesses make day-to-day as management responds to opportunities and threats.
• They usually involve relatively little, if any, resistance to the changes made.

Question 9

What is step change?

Answer 9

• These are the more dramatic or radical changes which management makes. They are often triggered through the arrival of new senior leadership and/or when it is recognised that the business is suffering from strategic drift.
• Step changes are substantial - they often involve significant alteration in the business activities and require a well-organised change management process to enable them to be made successfully.

Question 10

What is disruptive change?

Answer 10

• Disruptive change is a form of step change that arises from changes in the external environment.
• Disruptive change impacts the market as a whole, challenging the established “business model” (i.e. how products and services are sold).
• Rapid improvements in technology have been a leading driver of disruptive change since technological innovation provides new ways of delivering goods and services as well as reducing barriers to market entry.

Question 11

What are the advantages of change to a business?

Answer 11

• Can increase employee motivation/morale > not repetitive at work.
• Encourages innovation.
• Businesses can take new opportunities.
• Helps improve skills within the business.
• Can help sustain a competitive advantage.
• Change in organisation structure may enable a business to improve the effectiveness of its communication and decision-making.

Question 12

What are the disadvantages of change to a business?

Answer 12

• High chance it will be resisted > lower employee morale > absenteeism.
• Can cause a breakdown in employee/employer relationships.
• Loss of investment, time, and resources.
• Expensive due to implementing new systems and paying for training.