Edexcel A2 Business 3.6.1 Causes & Effects of Change PDF

Edexcel A2 Business 3.6.1 Causes and effects of change Revisionstation Theme 3 Retrieval Challenge Matrix 1 point 2 points 3 points What is the gearing Describe shareholder Explain empowerment ratio formula? returns strategies What is the...

Edexcel A2 Business 3.6.1 Causes and effects of change Revisionstation Theme 3 Retrieval Challenge Matrix 1 point 2 points 3 points What is the gearing Describe shareholder Explain empowerment ratio formula? returns strategies What is the ROCE Describe the Explain limitations of formula? limitations of ratio Investment Appraisal analysis What is Give an example of a Explain how corporate ‘absenteeism’? company with a culture is formed positive CSR image and one with a negative CSR image You will need worksheet 3.6.1 for this lesson From Edexcel a) Causes of change: changes in organisational size poor business performance new ownership transformational leadership the market and other external factors (PESTLE) b) Possible effects on: competitiveness productivity financial performance stakeholders Starter How has your life changed in the last year? Moved house? Changed school? New mates? Started to learn to drive? Bought a new phone? Your life, like business, is dynamic and not static, there are changes all the time. Causes of change Causes of change in business introduction There are lots of causes of change in a business, many of them are industry specific (e.g. rain in agribusiness) the main ones your exam board would like you to know about are: 1. changes in organisational size 2. poor business performance 3. new ownership 4. transformational leadership 5. the market and other external factors (PESTLE) #1 Cause of change: changes in organisational size The business may grow in size for example if it expands internationally Issues the business will face as a result could be: a. Maintaining the company culture b. Motivating staff during the expansion c. Increased labour costs with hiring of new staff d. Training of new staff #2 Cause of change: poor business performance This may happen if the business experiences poor sales, low profits or slow expansion Issues the business will face as a result; a. The business will need new objectives and a new direction b. The business will need some new strategies to compete (Ansoff’s) c. The business will need to look at what is necessary to improve performance this may mean delayering or redundancies #3 Cause of change: new ownership 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; a. There may be significant role duplication (two marketing managers for example) so there may need to be redundancies b. There may be a clash of cultures c. There may be issues of communication between the two businesses as they change and merge #4 Cause of change: transformational leadership This may happen if new leadership is brought into the organisation that seeks to change it Issues the business will face as a result; a. The business will need to reinvent itself to achieve competitive advantage b. A new business culture which challenges managers to develop new ways of thinking c. The business encourages the development of new ideas #5 Cause of change: the market and other external factors (PESTLE) 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; a. The business may need to respond by increasing their research and development budget to introduce more innovative products to their portfolio b. They may need to change the corporate objectives Possible effects of change Possible effects of change on a business introduction All these changes can cause effects on a business, they depend on the type, size and industry, but the general effects your exam board would like you to know about are: 1. competitiveness 2. productivity 3. financial performance 4. Stakeholders (internal) 5. Stakeholders (external) #1 Effect of change on competitiveness A business that is undergoing change may need to; A. Be aware of competitors actions and be prepared to react to them B. Benchmark with similar businesses to make sure they are keeping up C. Invest in R&D (research and development) to keep innovating and bringing new products to market D. Investigate new and emerging markets e.g. BRIC economies, (Brazil, Russia, India and China) or expanding trade blocs #2 Effect of change on productivity A business that is undergoing change may need to; n s A. Invest in new equipment and ea machinery m m B. Change production methods e.g. fir a ce from batch to flow sp C. Change the quality management ero a methods e.g. from Quality y erb Control to TQM Df o D. Retrain managers so their skills v er rs meet the new technologies used eo rke k t a wo How might the marketing U S 00 a t 1,0 function be impacted by h W r its change? fo #3 Effect of change on financial performance A business that is undergoing change may need to; a. Compare sales forecasts with available production capacity b. Production floor layout adapted for necessary increases in production c. Produce new cash flow forecasts How might the finance function be impacted by #4 Effect of change on stakeholders (internal) Stakeholders may be effected by change: a. Employees may feel unsure about their future and 07 s 3 promotion prospects l a n da i n Ire b. Managers may be worried Pa l u b li n y D about duplicate roles and s a t Pa go in l o sse be let redundancies, or possibly see Job ers to k the change as positive with w or new opportunities What effects might changes have on the owners of the business? #5 Effect of change on stakeholders (External) Stakeholders may be affected by change: a. Customers may be delighted with the new range of products and improved quality b. Suppliers may see the change as an opportunity to renegotiate old contracts with more favourable terms c. Shareholders may be concerned that changes will be expensive and have a Premier Foods is launching two ready- negative impact on profit to-eat dessert pots from Angel Delight into the convenience and wholesale channel. Plenary Quiz Read the phrases and decide if they are causes of or effects of change 1. Suppliers may see the change as an opportunity to renegotiate old contracts with more favourable terms 2. The business may need to respond by increasing their research and development budget to introduce more innovative products to their portfolio 3. Producing new cash flow forecasts 4. The business may grow in size for example if it expands internationally 5. The business may invest in new equipment and machinery Plenary Quiz Answers 1. Suppliers may see the change as an opportunity to renegotiate old contracts with more favourable terms (effect of change) 2. The business may need to respond by increasing their research and development budget to introduce more innovative products to their portfolio (cause of change) 3. Having to produce new cash flow forecasts (effect of change) 4. The business may grow in size for example if it expands internationally (cause of change) 5. The business may invest in new equipment and machinery (cause of change) Sample Edexcel A2 questions Case study for question 1  Sample question 1 Evaluatio Knowledg Applicati Analysis n e2 on 2 4 4 Answer sample question 1  Peer / self marking grid for 12 mark question Mark 1-2 marks Limited knowledge and some recall of business theory, answer may not be in context What went well: You used business terms correctly Even better if: You had discussed the business context given in the case study 3-4 marks Comments are in context, and chains of reason are present but very basic. Unbalanced argument, only discusses one side. What went well: You were able to give chains of reason in context in your answer Even better if: You had given both sides of the argument 5-8 marks Chains of reason are complete and argument shows both sides. Answer is in context, an attempt at a assessment using numerical data given in the case study. What went well: Your analysis was shown in your chains of reason Even better if: You had reached a supported judgement 9-12marks Accurate understanding and knowledge. Logical chains of reason, balanced argument, in context leading to a supported judgement What went well: You had logical chains of reason showing cause and effect Key terms Transformational leadership; A leader who transforms the business that they work for, for example Stuart Rose of Marks and Spencer (PESTLE); Political, economic, social, technological, legal and environmental external pressures on business Competitiveness; The ability of a business to sell goods and services in a market in relation to other businesses in the same market Productivity; the rate of output per unit of input Stakeholders; anyone with an interest in or who us affected by a business Revision Video