Theme 3 - 3.6.1 - Causes And Effetcs Of Change Flashcards
What are the main causes of change in business ?
- Changes in organisational size
- Poor business performance
- New ownership
- Transformational leadership
- The market and other external factors ( PESTLE ) - political, economical, social, technological, legal and environmental
Why do changes in organisational size cause a change in the business ?
So the business may grow in size for e.g. if it expands internationally to target new markets
The effects of this change could be issues such as:
- maintaining the company culture - as the business would become bigger so it would be harder to keep the same rules
- Motivating staff during expansion - there would be more workload during expansion so keeping the staff motivated would ensure them to stay on track and work hard so that the business runs as normal and therefore you get good customer satisfaction
- Increased labour costs with hiring of new staff
- Training of new staff - and recruitment which is all money
How does poor business performance cause a change in the business ?
This may happen if the business experiences poor sales, low profits or slow expansion
The issues the business would face as a cause of the change would be:
- The business will need new objectives and a new direction
- The business will need some new strategies to compete
- The business will need to look at what is necessary to improve performance this may mean delayering or redundancies
How is new ownership a cause of change in a business and what are the effects of this ?
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
How is transformational leadership a cause of change in a business and what are the impacts of this ?
This may happen if new leadership is bought into the organisation that seeks to change it
The 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
How is the market and other external factors ( PESTLE ) a cause of change?
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
What are the main effects of change in a business ?
- Competitiveness
- productivity
- Financial performance
- Stakeholders
Why is competitiveness an effect of change in a business ?
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
Why is productivity an effect of change in a business ?
• 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
What is the effect of change on financial performance ?
• 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
What is the effect of change on stakeholders (internal) and external ?
The internal stakeholders may be affected 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
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
