1.How the recession can create opportunities and threats for businesses and industries- Tesco selling unripe fruit, to save costs, Cineworld have installed 3D technology, Kraft foods, Woolworths and ASDA's takeover.
2. The long-term strategies and short-term plans adopted by businesses in the recession- Nissan closure of the Sunderland plant, increase products i.e. iPhone and iPad, introduction of new products and discount i.e. Sainsbury's. Nissan cutting jobs, supermarkets introduce money off fuel when spend over a certain amount.
3. Factors influencing the strategies businesses adopt in the recession - Asda's takeover, length of recession, severity and whether the recession is global or local
4. Strategies that businesses could have adopted to prepare for the recession - Retrenchment where BA have cut costs on pensions as previously spending over £1.8 billion. Energy supplier are trying to decrease prices in order to increase its customers.
5. The possible impact of the recession on stakeholders and on relationships between businesses and their stakeholders- BA, Royal mail. Investors are less likely to invest, No investors in football clubs such as Portsmouth, Liverpool and Preston.
6. The case for and against different businesses and industries receiving government financial support during a recession- When Northern Rock became intervened, people are less likely to go to banks that are insecure. Might have further problems due to repaying.
Section B- Answer One question- Recession. Use relevant business examples.
Section A- A choice of two questions.
Motor, UK Banking, Budget supermarkets, discount retailers and Media and Advertising.
Nissan, Starbucks, Dominos, Tesco, Apple and BA.
Understanding mission, aims and objectives
Corporate aims are aims in which the business expresses its ways in which the organisation intends to develop. Focus on the direction of the business, and provide a framework within which objectives and strategies can be drawn up.
Mission statement- communicates corporate aims to all stakeholders, outlines why the company exists, form a link between corporate aims and objectives. Identify with employees who can identify aims and objectives.
Three ways of achieving strategic development: Organic growth through internal development, slower growth i.e. Tesco. -External growth, takeover, mergers, quicker growth.- Synergy- collaborating with other companies.
Corporate objectives are a statement of quantifiable goals of a business, which should enable them to achieve their long term aims. Typical are profit maximisation, growth, return to shareholders or increased market share. Determined by organisational culture, private or public sector or the age of the business.
Four mains type of strategies: - Operation strategies, increase efficiency, by economies of scale or the best mix of capital and labour, Long term future by mergers and takeovers-corporate strategies, Making the most of strengths in the business to achieve competitive advantage, Growth into other countries.
Corporate strategy: a plan based on the corporate aims and objectives which defines the overall scope and direction of the business by identifying its choice of business, markets and activities.
Understanding mission, aims and objectives
Investors: Healthy balance sheet, Shareholders: Expect to maximise profits, Employees: Higher pay awards, Managers: Expect promotional opportunities, financial rewards and status, Customers: Value for money, low prices and high quality, Suppliers: Regular and increasing purchases, The government: high tax revenues and legal compliance, Creditors: Healthy cash flow, Society: Job creating, environment and ethical issues. All these create a conflict of interest.
Perspective of some groups:
-The Government: Discourage the relocation to overseas, as will increase unemployment. Invest in training and development, to improve skill level, increase productivity and reduce absenteeism.
-Customers put pressure on business to improve environmental or ethical issues by boycotting products.
-Large organisations having influence on suppliers and/or customers.
-Creditors and investors can stop potential products by supplying funds, need assurance of a good financial return.
-Society can put pressure on through the media, relates to environmental damage or unethical trading.
The relationship between business and the economic
Micro economic factors- -The prices for alternate products. Supply problems for the producing area. Reduced demand from the product.
Trend in UK economic growth: Increase 1992-2007. GDP rose by 3.2%. Forecast a recession , falling GDP in 2009. Macro-economic factors- Factors that effect the whole economy i.e. Credit Crunch.
Business strategies for recovery: Use existing capacity ad increase output to meet expected increase in demand- low risk and no additional capital required.- Expansion of capacity to cope with expected increase in demand- Substantial capital investments, uncertain on recovery, other firms adopt, then sales wont increase.- Develop new products that are in greater demand as consumer prices rise (Income elastic products- R&D takes time, could produce new product after recovery.
Business strategies for downturn or recession:-Close facilities as demand falls ad excess capacity increases. Job loses will reduce relations and security. If downturn is short, result in inadequate capacity.
Develop new products- may damage firm reputation ad brand image, not all consumers will experience fall in their income.- Lower prices- Reduce profits, brand image, demand may be inelastic, revenue will fall. -Take over business or assets cheaply- Uncertain on downturn end and purchases needed to be financed.- Continue with expansion- Income elastic products, only suited for cash rich businesses.
The relationship between business and the economic
GDP: Measures the total value of output produced in a country over one year. The pattern shown is called the business cycle (fluctuations in the level of economic activity, measured by the real GDP, over time.
Four key stages are:
1. Boom- A period of fast economic growth with rising incomes and profits. Higher profits mean higher costs, wage increases, high demand for goods and services.
2. Downturn leading to recession: Falling demand and higher interest rates, GDP starts to slow or fall, continuous for six months technically a recession.
3. Slump- House and assets prices fall, GDP falls, usually due to government failure.
4. Recovery- Real GDP starts to increase again. Rate of inflation falls, creating competitive products or government action is working.
The relationship between business and the economic
Evaluation of business strategies in response to higher inflation:
- Cut internal costs to keep prices down
- Job losses and restructuring. -Source from cheaper suppliers-
-Question over quality and reliability.
-Cut profit margins by not raising prices as much as costs-
-Depend on price elasticity of products, low profits may hit future investment plans.
- Raise profit margins if inflation is largely caused by demand pull pressure, increase prices by more than costs increases
- Depend on price elasticity, consumers might resent firms for taking advantage of economic condition.
Drawbacks of economic growth: -Greater inequality, lead to poor business decisions, expensive products to poor regions.
Inflation rises- Inegative impact on businesses, especially with high gearing ratios.
Rapid economic growth lead to supply shortages, could lead to inflation
Interest rates- The higher the rate of inflation, the higher the level of interest rates used to control it, responsibility of Monetary Policy Committee of the Bank of England.
Inflation- Recorded by average price rises. Measured by Retail Price Index and Consumer Price Index, average price changes over 600 goods and services each month. Either because demand pull inflation or cost push inflation.
The relationship between business and the economic
Benefits of economic growth: Higher living stadards, increase demand for income elastic goods. -Business expansion more profitable - Higher profits from increased sales and new markets provide finance for expansion. - New business start ups being more successful.
Government tax revenue increase, improving countries competitiveness due to improved services.
Cost of borrowing capital for businesses: -Cost of loans and overdraft increases and interest rates rise, impact on net profit. - High interest rates means consumers will have less money to spend. (Discretionary income). - Interest rates are raised £ depreciates.
In responds to higher business rates, the following strategies:
- Reduce gearing ratio by selling assets- Reduce gearing ratio by raising capital
- Offer favourable credit terms for customers
- Less disposable income products
- Postpone expansion projects
Unemployment- The number of people willing and able to work but unable to find employment.
The relationship between business and the economic
Structural Employment- Structural change in the ecconomy cuases job loses in industry, e.g. Shipbuilding and clothing.
Frictional Employment- When people spend some time to find another job after losing or leaving a previous one.
Cyclical unemployment- general unemployment due to economic downturn or recession.
Exchange rate: The price of one currency in terms of another.
Exchange rate appreciation- An increase in the value of currency, imports low, exports high.
Exchange rate deprecation- A fall in value of currency, imports high, exports low.
Strategies in response to £ exchange rate deprecation
-Reduce import content products made in the UK as imports are more expensive.
- Divert Marketing resources export markets- exports prices now lower.
- Consider sales of overseas assets as these will now be worth more in £ terms.
- Expand operations in UK, as foreign will be expensive.
Trends in the £ exchange rate, € has decreased whereas $ has varied.
Globalisation Of Markets
Globalisation- The growing trend towards worldwide markets in products, capital, labour, unrestricted by barriers.
Free trade- International trade that is allowed to take place without restrictions such as protectionist tariffs and quotas.
Tariffs- A tax imposed on an imported product.
Quotas- A physical limit placed on the quantity of imports of certain products.
Globalisation has an impact on business strategies; Increased international trade, growth of multinational businesses in all countries and freer movement of workers.
Exporting- Setting up teams and support networks, transport and translation costs, adapting products to meet local health and safety laws, researching local market trends and consumer tastes and therefore adapting products.
Globalisation Of Markets 2
-Better opportunity for selling goods in other countries, higher sales from saturated markets and opportunities for opening up new markets.
-Increased competition gives firms the incentives to become more internationally incentive.
-Pan-European and Pan-Global strategies eliminates different markets-different products.
-Wider choice of locations- Lower costs and different access to markets.
-Greater freedom to arrange mergers and takeovers with firms from other nations.
-Weak businesses will cease to exist due to other countries having freer access to the UK's market.
-Pan-Europeans/Pan-Global- The cultural taste can fail to consider different consumers and nations.
-Transport and communication problems, the risk of unethical practices by managers delegated from head office.
-UK firms are increasingly subject to foreign takeovers: Land Rover and Jaguar by Tata (India).
-Bad publicity from anti-globalisation pressure groups, particularly from firms found guilty from Environmental damage.
-Governments will have less influence on business decisions, e.g. preventing closure of factories.
Developments in emerging markets
Emerging Markets- Are nations with social or business activity in the process of rapid growth and industrialisation. There are 28 emerging markets in the world, China and India being the largest.
-Investment projects being in jeopardy due to political unrest in surrounding nations.
- Cyclical variations in the economy, countries that cant manage GDP growth are more extreme.
- Environmental and ethical issues, these countries offer low cost operations.
- Legal protection for business patents, copyrights and trade names may be less effective than in developed economies.
Business and the political and legal environment
Government intervention- Aims to achieve the government's objectives by controlling and supporting business, passing legislation and taking action to control the economy.
Laissez-faire 'V' Interventionists government government policies
L-F-Intervene as little as possible.
-Higher taxes, lower consumers living standards, not receiving subsides could rise taxes.
-Unfair to support some but not others, too expensive to give to all firms.
-No profit incentive to reduce costs, innovative products and increase efficiency.
-Governments in other countries given larger subsidies, free international trade distorted.
-Businesses work best when with no or minimum support.
-Failing businesses cant be kept going forever, economic changes are inevitable.
-Profitable projects will attract private investment.
-Doesn't solve long term problems or poor competitiveness.
-Increase Job opportunities and reduce costs of unemployment in depressed regions.-New technology and efficiency opportunities.
-Imported goods cheaper therefore benefiting consumers.
-Support firms that could be successful in the future
- Industries like high eco-energy projects need to be funded to get off the ground.
Business and the political and legal environment 2
Balance of Payments: the account that records the UK's values of imports of goods and services and the value of its exports- a deficit exists when import values exceed export values and surplus exists when export values exceed import values.
Fiscal Policy- the use by the government of changes in tax rates or government spending to manage the economy.
Monetary policy- use of interest rates by the bank of England to keep inflation at a target of 2%.
Supply side policy- measures taken by the government to improve efficiency of economy to allow for an increase in the total supply of goods and services.
Expansionary fiscal policy- increases in government spending greater than increasing taxes.
Contactionary fiscal policy- Increases in taxes than increases in government spending.
Impact on businesses after lowering income tax:-
- Increased disposable incomes, which leads to greater demand.
- Increased worker motivation, more effort to seek overtime and provide 'extra effort'.
Impact on businesses after lowering corporation tax:-
- Increases profit, investment in dividends and for the company.
- Encourage more business start-ups in UK.
Business and the political and legal environment 3
Impact on business of raising fuel duty:-
-Higher transport costs, some firms more affected then others.
-Demand for higher wages as higher inflation.
Impact on business of increasing alcohol duty:-
-Reduce spending in pubs- demand may be price inelastic.
Impact on business of increasing spending on schools and Universities:-
-Increased demand for construction companies
-Improvements in the quality and educational standards of the labour force should help to improve productivity for many sectors of industry, will take several years to see benefits.
Impact on business of increasing government budget deficit:-
-Increase economic growth due to higher spending into economy and less from taxes.
Impact on business of interest rate changes:-
-Reduce chance of survival for new businesses.
-Demand for necessaries will fall.
-Higher costs of loans could make a profitable project, a loss.
-Demand for £ could create appreciation by export and import changes.
Business and the political and legal environment 4
Supply side policies:- Improve economic efficiency, impact on businesses:-
- Encourage new business start-ups to create new enterprises: More competition for existing firms, increases output and jobs, only realistic when economy is expanding.
- Expand University courses to increase proportion of working population: Better qualified staff, compete effectively in global market, take several years to have such impact, Loans from Uni discourage.
-Allow increased immigration to the UK: Increase labour supply, wage rises down, skill shortages, increased congestion property unaffordable due to demand.
- Encourage multinational investment: More competition for UK, make more efficient from this, output in the economy due to job increases.
-Reduce income and corporation tax: Increased incentives in firms to invest into the future and for employees to work, other countries are lower then UK and other taxes increase to finance policy.
Two main political developments in recent decades are:-
-Growth of the EU and the movement towards greater freedom of trade.
Protectionism- Policies used be governments, such as tariffs and quotas, to limit imports and restrict free trade.
Legislation- Disability (treated equal), Minimum wage (£5.80), Employee relations (Trade union on 50%) and Health and safety.
Consumer protection- Sales of goods act (Merchantable quality) and Consumer protection act 1997 (Run by EU law).
Environmental protection- fines on businesses that exceed emission limits.
Business and the political and legal environment 5
Impacts of the UK adopting the Euro:-
-Reduction in transaction costs, however the change to Euro would cost £12-15 billion.
-Reduced uncertainty due to exchange rate movements.
-Easy to see suppliers value due to all one currency.
-Increased trade and capital movements.
-Multinationals more willing to set up who discourage the £.
-Lose independence in interest rates from Bank Of England.
Impacts on the UK of further EU expansion:-
-Huge new markets without any trade barriers. -Easier mergers and takeovers.
-Low wage countries can be exploited. -Immigration can boost UK labour force.
-Drive UK suppliers out of business. -Eastern European uncertainty.
-Tax rise due to poorer EU countries needed to be funded.
-EU decision making to be slower due to consolation.
Why government place laws that constrain businesses?
-Prevent exploitation of employees, lay down strict minimum standards on wages and working environment.
-To improve industrial relations to prevent strikes.
-Prevent exploitation on consumers, consumers buying more due to high income and attitude of faulty products are suppliers/producers fault.
-Protect natural environment from urban sprawl, increased pressure on global warming.
Business and the political and legal environment 6
Negative impact on business of legal controls:-
-Administration costs and meeting provisions for acts, e.g. Higher wage costs, higher emissions & equipment.
-Businesses who's countries have lower levels of legislation gives them unfair advantage.
-Planning laws can cause restrictions.
-Product designs have to be adapted.
Positive impact on business of legal controls:-
-Workers are paid at least minimum wage, increase work incentives.
-Health and Safety legislation reduces accidents and days lost.
-Reduce UK strike record.
-Prevent large scale destruction of countryside, which makes more attractive to tourists and businesses willing to invest.
-Consumer confidence has encouraged consumers to spend.
-All businesses when accepted EU laws will create a fair business environment.
Legal Controls-Final Evaluation:-
Two strategies businesses could adopt in response to tighter legal controls:
- Exceed minimum standards, easier to recruit, good publicity, marketing advantages & law chance of breaching laws.
-Locate abroad, could be unethical, consumer resistance & consumer health issues.
The relationship between business and the social e
Social environment- the environmental factors that influence business behaviour including the characteristics of the population and natural environment in which it exists.
Demographic factors for the impact of change to the social environment:- These can define where a business operates such as, birth, death, migration and relationships.
Environmental issues- across the globe cover concerns such as: slumping air quality and increase droughts, food miles and carbon footprint, use of non-sustainable resources and global warming. These caused increased pressure for business leaders, governments and environmentalists to work together.
Corporate Social Responsibilities: a firms decision to accept responsibility for its social, environmental and ethical actions, often reported through a CSR report.
Retailers reactions are very positive when dealing with the reduction of carrier bag usage, with the majority of them making the effort to reduce this further otherwise charges will be imposed if numbers aren't greatly reduced.
Ethical environment- the moral beliefs and attitudes from both inside and outside a business that influences behaviour.
Public relations- actions taken by a business to help achieve a positive relationship with its shareholders.
The relationship between business and the technolo
Impact of technological change:- Benefits:
-New innovative products from new technologies (R&D).
-Cost savings, especially in operations management.
-Improved efficiency and better customer service.
-New marketing opportunities, internet will have a huge impact on the way services and goods are marketed.
-rapid obsolescence of existing technology, changing the current technology.
-HR management issues, possible redundancies.
-Capital cost, training cost and maintenance costs.
-management culture may not be prepared to accept it, resent the influence of technology.
Making strategic choices about technology must also involve qualitative factors such as the:
- Attitude and culture of management and workers (survival of jobs) to technological change.
- Potential gains to customer service which are real and long lasting.
-Increased expense of equipment which have just been recently purchased.
-Existing processes and systems used within the business, e.g. production & marketing.
Relationship between business and the competitive
Contrasts in competitive structure between hairdressing and Petrol retailing:-
-Hairdressing have 7,000 members of Hairdresser foundation, many are not part of this though, only 13 major petrol retailing businesses, dominated by big 3 supermarkets, Esso, Shell and BP.
-Very different quality and range of services for most hairdressers, None, only Shell Optimax by big 3.
-Huge difference, depending on Location, quality of service and reputation. Very slight differences.
-Easy entering into market, difficult due to health and safety licence required, expensive equipment and wholesale supply hard.
Competitive structure- the number and strength of competing firms in an industry and the ease of entry for new competitors. Monopolistic competition- a competitive industry with many firms, easy to enter and good knowledge amongst consumers about prices and products but with each firm producing differentiated products. Oligopoly- industry with competition amongst relatively few businesses. Competitive structure is important because helps the amount of choice for customers, level of competition PPP, profitability of businesses. Strategies for increased competition:-Integration, New products/services, cost cutting & better branding. Dominant- less choice for consumers, may change prices, do anything to maintain position.
Changes in buying power of customers- Higher the firms reputation, more likely to exploit customers.
Buying power of customers- Able to influence, for example using the internet more rather than shop.
Changes in selling power of customers- The more concentrated and the supply of materials, greater power.
Relationship between business and the competitive
Collusion- firms working together-called cartel- to fix prices or agree on output levels to reduce competition.
Competition Policy- aims to prevent the abuse of monopoly power so that competition in markets is not restricted. Aims to: protect consumers, outlaw practices and arrangements, investigate dominant businesses, investigate large scale merges or takeovers. Office of fair trading can do- impose fines up to 10% of annual revenue, refuse permission & release reports to the media about collusion.
Porters 3 competitive strategies:-
Cost leadership- achieved by, pressure on suppliers, supervision of labour, low cost distribution, incentives. May not stop lower cost entrants, market resistance to cut costs, inflation in costs unavoidable.
Differentiation from rivals-: Focus on project engineering, creative market flair, investment in R&D, attractiveness for skilled labour, managers & designers. Cost change too great for brand loyalty to be maintained, Variations in business cycle & Imitation may reduce brand identity.
Focus on niche markets- Mixture of previous two. Existing niche suppliers may have developed specific products, have brand loyalty or undertaken effective market research & additional costs.
Internal causes of change
Reasons for increased growth:
-Increase profit, achieving higher sales.
-Increase market share, higher profile and bargaining power.
-Increase economies of scale (benefits from operating a large business).
-Increase power and status of its owners and directors.
-Reduce the risk of being a takeover target.
Internal growth- expansion of a business by means of opening new branches, shops or factories (also known as organic growth).
External growth- business expansion achieved by means of merging with or taking over another business, from either the same or a different industry.
Merger- An agreement by shareholders and mergers of two businesses to bring both firms together under a common board of directors which shareholders in both businesses owning shares in the newly merged business.
Takeover- when a company buys over 50% of the shares of another company and becomes the controlling owner of it. It is often referred to as an 'acquisition'.
Integration- 2 firms integrated better then one large one because: R&D, buying supplies in large quantities and using same sales outlets and teams.
Internal causes of change 2
Horizontal integration- Merging with or taking over another business in the same industry at the same stage of production.
Vertical integration- Merging with or taking over another business in the same industry but at a different stage of production.
Backward vertical integration- merger with a supplier business.
Forward vertical integration- merger with a customer business.
Conglomerate integration- Merging with or taking over another business in a different industry.
Synergy- The whole is greater then some of the parts.
Retrenchment- The reduction of business costs in order to become more financially stable, increase profits and to move out of loss making areas of operation.
Steps: Consult with staff representatives on number of jobs lost, clear reasons, when it will take place, assistance to employer & Reassure staff that are retained.
Management-by-out- a form of ownership change where a company's existing managers acquire a significant part or all of the business.
+ of buy-outs- Senior managers incentive because they own business to make decisions and improve efficiency, Less bureaucratic and decision making becomes quicker & Raise capital so be able to concentrate on other areas.
- of buy-outs- Financed by hight debt levels and high gearing, makes them very vulnerable to economic changes.
Internal causes of change 3
Flotation on the stock exchange- Changing to a public limited company.
+ of flotation- Rewards the owner, allows access to capital to expansion, gives the business higher market value, status of business improved.
- of flotation- Arranging maybe too high, conflict between ownership, control and objectives, greater disclosure of accounting, risk of takeover if over 50% of shares owned.
Private equity ownership: when wealthy investors buy out a business which is usually under performing and take it over with the intention of transforming its management and performance.
Against the trend: substantial tax benefits are given to private equity investors and there is less public scrutiny as the accounts no longer have to be published, only interested in short term profits.
Private equity investors claim that: The companies that were taken over were under performing and the new management style will lead to growth & now conflict on who owns the business.
Planning for change
Corporate plan: a methodical plan containing details of the organisations central objectives and how it intends to achieve them.
Objectives for sales:- increase sales of existing products, develop new markets, r&d new products & diversify.
Benefits- Clear focus and sense of purpose, communicate sense of purpose to all managers, create effective control and review process.
Limitations- Could be ruined by external or internal changes, inflexibility to change will inevitably by punished.
Value of corporate plans: Show them to potential investors, major lenders, governments if requesting development grants, all staff.
Internal influences of corporate plan: Financial resources, operating capacity, managerial skills and experience, staff numbers and skills & culture.
External: Macro economic conditions, Bank of England policy changes, technology changes & competitions actions.
Contingency Planning:- Preparing an organisation's resources for unlikely events.
Key steps:Identify the disasters, Asses the likelihood of these occurring, minimise the potential impact of crisis & plan for continued operations of the business.
Benefits of contingency planning:- Reassures staff, customers and local residents. Minimises negative impact on customers and supplies in the event of a major disaster. PR response more likely to be speedy.
Limitations:- Costly and time consuming, train staff and have practice runs. Needs to be updated. Avoiding disasters would be better.
Leadership: influencing and directing the performance of group members towards achieving the goals of the organisation.
Features:- exerting influence on others, motivating and inspiring people, realising potential, good example & achieving goals.
Effective leadership: ability to communicate, willingness to listen, capable of critical thinking & great self motivation and determination to succeed.
Management- the process of setting objective and taking decisions to make the most efficient use of an organisations resources.
Autocratic- Leaders take decisions on their own with no discussion.
Democratic- Leaders discuss with workers before making decisions.
Paternalistic- Leaders will listen and explain issues and consult the workforce, but will not allow them to make the final decision.
Bureaucratic- Leaders use rigid and complex rules and procedures to direct and lead the organisation.
Laissez-Faire- Leaders leave colleagues to get on with their work with no supervision or control.
McGregor's theory X&Y-
X- do not like work, need to be controlled in order to put in effort, motivated by money, seeks security not job enrichment.
Y- Find work natural, do not naturally dislike work, seek and willingly accept responsibility, motivated by means other than control and threats, capable to show initiative and imagination in order for business to succeed.
Leadership Change 2
Internal factors:- the skill levels and experience of the team, the work involved, the preferred or natural style of the leader & time limit.
External:- The economic environment, the nature and speed of chnage in the industry & legal changes.
Managing change means:- setting new objectives and recognise the need for change, ensuring the adequate resources, appropriate planning when the change happens.
Contrast this with leading change:- establishing a vision to the business and attracting staff, motivating all staff, putting change at the centre of the business.
Senior managers and employees look for a number of things:-
-clear vision and sense of direction, support and commitment to their welfare, confident and effective decision making, effect planning and timely and full communication.
Culture of change
Organisational culture- The values attitudes and beliefs of the people working in an organisation that control the way they interact with each other and external stakeholder groups.
Power culture- Concentrating power among just a few people.
Role culture- Each member of staff has a clearly job title and role.
Task culture- Based on cooperation and team work
Person culture- where individual are given the freedom to express themselves fully and make decisions for themselves.
Entrepreneurial culture- Encourages staff to take risks to come up with new ideas and test business ideas.
Reasons for change: Product led business needs to respond to changing market conditions to involve more staff, Recent privatised business needs to be more profitable, a merger or takeover needed to adapt, declining profits and market share, poorly motivated staff.
Problems of changing:- Concentrate of the positiveness sides of the business, obtaining full commitment of people will be hard, encourage bottom up participation, train staff in new ways and procedure, change the staff reward system.
Making strategic decisions
Business Strategy- a long-term plan of action to achieve the objectives of the business.
Strategic Decisions- result in changes to long term plans, involve many resources and are difficult to reverse.
Tactical decisions- involve meeting short-term targets, require fewer resources to implement and may be easy to reverse.
Information management- the collection and assessment of information from one or more sources and the distribution of that information to the appropriate managers.
Management information system- A compute system to help managers plan, take decisions and control business operations.
PEST analysis- The assessment of the external, political, economic, social and technological factors that may present constraints on strategic decisions made by a business.
Scientific decision making- an attempt to make logical business decisions on the basis of data that is analysed and tested.
Scientific approach- Reduces risk of strategic failure, decisions that fail will be halted, analysis of market will halt or suggest other markets.
Hunch- Much cheaper, much quicker, scientific method and does not guarantee success, could work well if made before.
Making strategic decisions 2
Four main factors that will influence important strategic decisions:
Corporate objectives- key determine factors in business strategy.
Ethical position- Some may carry more than others, if against normal standards, will be harming on brand, Price decrease for controls over binge drinking.
Resources Available- May be beyond resources available, Lack of skilled staff, recession.
Relative power of stakeholder groups- Environmental groups pressurised companies to change to bio fuels, declining power of UK trade unions.
Change management- planning, implementing, controlling and reviewing the movement of an organisation from its current state to a new one.
Business process re engineering- Fundamentally rethinking and redesigning to processes of a business to achieve a dramatic improvement in performance.
The major causes of change:- technological advances, Macro economic changes, legal changes & competitors actions.
Force field analysis- an analytical process used to map the opposing forces within an environment (such as a business) where change is taking place.
Project champion- A person assigned to support and drive a project forward who explains the benefits of change and assists and supports putting into practice.
Project groups- These are created by an organisation to address the problem that requires inputs from different specialists.
Making strategic decisions 3
1. Establish a sense of urgency.
2. Create an effective project team to lead the change.
3. Develop a vision and a strategy for change.
4. Communicate this change vision.
5. Empower people to take action.
6. Generate short term gains from change that benefit as many people as possible.
7. Consolidate these gains and produce even more change.
8. Build to change into the culture of the organisation so that it become a natural process.
Residence to change:
-Fear of the unknown, fear of failure, losing something of value, false beliefs about the need for change, lack of trust, reluctant to change.