Causes and effects of change

Question 1

List the 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 changes in organisational size as a cause of change in a business.

Answer 2

The business may grow in size for example if it expands internationally

Issues the business will face as a result are:
Maintaining the company culture
Motivating staff during the expansion
Increased labour costs with hiring of new staff
Training of new staff

Question 3

Explain poor business performance as a cause of change in a business.

Answer 3

This may happen if the business experiences poor sales, low profits or slow expansion

Issues the business will face as a result;
The business will need new objectives and a new direction
The business will need some new strategies to compete (Ansoff’s)
The business will need to look at what is necessary to improve performance this may mean delayering or redundancies

Question 4

Explain new ownership as a cause of change in a business.

Answer 4

This may happen if the business has been bought or merged with another business or there has been a management buyout

Issues the business will face as a result:
There may be significant role duplication (two marketing managers for example) so there may need to be redundancies
There may be a clash of cultures
There may be issues of communication between the two businesses as they change and merge

Question 5

Explain transformational leadership as a cause of change in a business.

Answer 5

This may happen if new leadership is brought into the organisation that seeks to change it

Issues the business will face as a result;
The business will need to reinvent itself to achieve competitive advantage
A new business culture which challenges managers to develop new ways of thinking
The business encourages the development of new ideas

Question 6

Explain the market and other external factors as a cause of change in a business.

Answer 6

This may happen if there have been new entrants to the market (Porter’s 5 forces) or due to EU expansion, or changes in the market (e.g. energy market deregulation)

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
They may need to change the corporate objectives

Question 7

List the possible effects of change on a business.

Answer 7

competitiveness
productivity
financial performance
stakeholders

Question 8

Explain the effect of change on competitiveness.

Answer 8

A business that is undergoing change may need to;

Be aware of competitors’ actions and be prepared to react to them

Benchmark with similar businesses to make sure they are keeping up

Invest in R&D (research and development) to keep innovating and bringing new products to market

Investigate new and emerging markets e.g. BRIC economies, (Brazil, Russia, India and China) or the expanding EU

Question 9

Explain the effect of change on productivity.

Answer 9

A business that is undergoing change may need to;

Invest in new equipment and machinery
Change production methods
Change quality management methods
Retrain managers so their skills meet the new technologies used

Question 10

Explain the 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 and capacity
Produce new cash flow forecasts
Discuss how to raise any extra capital

Question 11

Explain the effect of change on internal stakeholders.

Answer 11

Internal stakeholders may be effected by change:

Employees may feel unsure about their future
Managers may be worried about duplicate roles and redundancies, or possibly see the change as positive with new opportunities

Question 12

Explain the effect of change on external stakeholders.

Answer 12

External stakeholders may be effected by change:

Shareholders may be reluctant to invest while there is a period of change happening, until circumstances are more settled within the business

Customers may be delighted with the new range of products and improved quality

Suppliers may see the change as an opportunity to renegotiate old contracts with more favourable terms