AQA BUSS4 - Managing Change

Revision notes for the 'Managing Change' chapter for BUSS4 AQA. No case studies included, just the theory from the specification.

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  • Created on: 15-06-11 00:03
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Internal Causes of Change
The three main internal causes of change are changes in organisational size, new
leaders/owners, and poor business performance.
Changes in Organisational Size
Growth is usually seen as a natural development for a company. It can provide benefits and
opportunities for a business and for its stakeholders. At a basic level, growth enables a
company to reach breakeven and make profit. It provides more opportunities for a company
to take advantages of economies of scale, and a growing, dynamic company is more likely to
remain competitive.
There are four main reasons for the change in organisational size of a firm; organic growth,
mergers, takeovers and retrenchment.
Organic Growth
When a firm expands its existing capacity by extending its premises or building new
factories from its own resources, instead of integration with another firm
Organic growth is an internal growth strategy, and may be pursued for a number of reasons:
- A product is in its early stage of the product life cycle and is not yet fully established in
the marketplace
- When its products highly technical and the firm needs to gain experience of dealing with
it, ensuring any problems are ironed out
- If the costs of growth need to be spread out over time
- May be the best option because there are no suitable acquisitions available
Finance used to implement organic growth tends to come from the retained profit,
borrowing or attracting new investors. This means the process tends to relatively slow, but
carries a smaller risk.
Merger
Where two or more firms agree to come together under one board of directors
Mergers occur when the two businesses agree that they can increase their combined profit
or achieve other objectives through merging their businesses. It is an external growth
strategy, which is usually the fastest way to achieve growth, but given the problems of
integrating two separate organisations, it can be risky.
Mergers, as well as takeovers, can be classified into three types of integration:
Vertical Integration ­ the coming together of firms in the same industry but different
stages of the production process
Horizontal Integration ­ the coming together of firms operating at the same stage of
production and in the same market
Conglomerate Integration ­ the coming together of firms operating in unrelated markets
Takeover

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Where one firm buys a majority shareholding in another firm and therefore assumes
full management control
Along with mergers, takeovers are usually the fastest way to achieve growth, however it can
be risky due to the problems of integrating two separate organisations.…read more

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Managing Growth
Growth is a difficult process to manage for medium sized business, especially if it is rapid.
This often means owners, who have been in complete control of all aspects of a business,
have to plan for, and then adjust to, handing over responsibility to others. In comparison,
the leadership of a large business tend to have a much less hands on approach and tend to
delegate more.…read more

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Management buyouts (MBO) are where the managers of a business buy out the
existing shareholders in order to gain ownership and control of the business or
part of the business
Finance for Buyouts:
Finances for buyouts can come from managers' personal funds, bank loads and investment
funds obtained by selling shares to employees, but it is more usual for it to come from
either venture capitalists or private equity firms, which work by lending the MBO the cash
and by taking a stake in the…read more

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This usually means floating stocks on the stock market. Companies join the stock market all
the time, the more optimistic the economic climate, the more new issues of shares there
are. The value of a stock market listing is that a company has high profile and access to a
large pool of capital. This can provide a more balanced capital structure, especially for highly
geared firms.…read more

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Planning for Change
Corporate Plan
Strategy detailing how a firm's aims and objectives will be achieved,
comprising both medium and long term actions
The mission statement, corporate aims and corporate objectives of a company dictate the
future direction of the business. The corporate plan attempts to achieve these aims and
objectives and also ensures that the firm's actions match its mission statement.
Aims and objectives start off broad at the corporate level and become more detailed at the
level of each functional area.…read more

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Corporate Planning Process
The corporate planning process involves the following stages
Mission statement. This stage sets out the purpose of the organisation and its
corporate aims
Objectives. This stage breaks down the corporate aims and indicates how they can be
achieved in terms of functional objectives
To produce a plan of action, a company needs to gather information about the business and
its market. Such information comes from internal and external sources:
Internal Environment.…read more

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SWOT analysis is a technique that allows an organisation to assess its overall position, or the
position of one of its divisions, products of activities. It uses an internal audit to assess its
strengths and weakness, and an external audit to assess its opportunities and threats. It
gives a structured approach to assessing the internal and external influences on corporate
plans.…read more

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Preparing for unexpected and usually unwelcome events that are reasonably
predictable and quantifiable
In a business context, a crisis is any unexpected event that threatens the well-being or
survival of a firm. It is possible to distinguish between two types of crisis; those that are
fairly predictable and quantifiable, and those that are totally unexpected and have massive
implications for business. This is the difference between sudden fluctuations in the exchange
rate and a natural disaster. The former can be dealt with through contingency planning.…read more

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Influences on Change: Leadership
Leadership
- Deciding on a direction for a company in relation to its objectives, and inspiring staff to
achieve those objectives
Management
- Getting things done by organising other people to do it
Both leaders and managers are required for effective corporate growth. Risks taken by
leaders create opportunities, which through the skills of managers turn into tangible results.
Managers have subordinates, while leaders have followers. Managers have a position of
authority and their subordinates work for them.…read more

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