Component 3

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  • Created by: Estelles
  • Created on: 14-06-18 17:34

Change - what causes rapid change? incremental rap

Incremental= slow      rapid=fast

What causes rapid change?

-new tech, changes in comp, legislation, change in consumer taste, economic conditions

Planned change- internal, structured and time tabled, clear objectives and timelines and resources 

Unplanned change- response to a shoch, unstructured and under resuorced, exogenous shock 

Effects of change - retrain workforce, flexible workforce, shorter product life cycle, production methods change, diminished brand loyalty, comply w new legislation, new products developed

Change is an ongiong process and the pace of change has accelerated in the last decade. Failing to adapt to the changes will leave you behind. 

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Change -Internal causes of change

Internal causes of change:

-Management style, change in culture, difficult to implement as workers naturally resist change

-Business ownership, affect all stakeholders, want to improve profitability 

-Business size, organically by building products; investing in new tech; develop distrubution; prevent cash flow probs;limits risk. Rapid organic has effect of putting pressure on liquidity and staff have to develop new skills and adapt quickly

-Intro of new tech, affect pattern of demand and methods of production 

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Change- external causes of change

External causes of change 

-introduction of new tech, development will force changes, methods of production can improve quality and output 

-labour market, wages, legislation, push up costs, recession, imigration policy 

-economic conditions, exchange rates and inflation

-competition, existing comp can change strategy, new competition 

-consumer tastes, always changing, change demand patterns 

-new legislation, limit and free activity, EU legislation 

Effective change management

-employee preparation      -additional capital investment

-increase R+D costs 

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Change- implementing change

Storey's four methods 

1) negotiated total package             -negotiation between workers and management, based on agreement between all, increased rewards and improved conditions, co-ordinated process, require a lot of prep and expenditure, may not be possible in a highly competetive environment 

2) negotiated piecemeal initiatives         -consult and agree on various things, no overall agreement, easier to implement, could result in difficulties as a lack of complete system change 

3) imposed piecemeal initiatves          -managers plan and implement changes, saves time, structure of change in hands of people who understand the overall objectives, could be met with resistance and resentment, piecemeal may be aimed at different objectives whereras total package is one overall objective 

4) imposed total package            -senior management plan and introduce major change all at once w/o consultation to workers, rapid change of external factors, resisted, sucess depends on the skill of senior management whilst minimising disruption 

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Change- Lewins 3 step process and Resistance to ch

Lewin's 3 step process

Reinforcing change is what matters. Concerned with ensuring change is carried into the future

1) unfreezing  -create motivation, realisation for change, desire change 

2) change/ transition  -potentially difficult, need time to adapt, support and training is important, not critisised for mistakes, workers develop own solutions 

3) refreeze   -establish stability, accepted change, new= norm, settled 

Resistance to change 

- Worker resistance, fear of the unknown, need to involve, clearly explain a clear strategy and vision

-Supplier resistance, involve from outset, smaller suppliers have less power, 

-Owner resistance, increase risk, costly and involve investment

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Change- Evaluating and organisational culture and

Organisational culture and change 

-reflects beliefs, norms and values of business, these are difficult to change, culture change must start at the top of an organisation, leaders will have a clear idea and need to provide training, need to communicate effectivley the reason for change and that it is understood, resistant workers are identified and need to give new objectives to motivate, some employees may have to leave

Evaluating change

look at performance indicators:

-delivery times        -production defects

-customer surveys      -market share 

-turnover       -profit

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Risk management- quantifiable and process

-Risk is a circumstance or factor that may have a significant detrimental negative impact on the operations or profitability 

- can result from internal or external conditions 

- uncertianty= possibility of incurring losses due to problems and circumstances, expected or un expected 

Qauntifiable risk- reasonably predictable and the liklihood of these risks occuring and impact can be measured 

1) financial risk 2) operational risk 3)strategic risk 4)compliance risk 

process of risk management 

1) idenification and analysis 2)measurement of liklihood of risk 3)assesment of potential impacts 4) deciding how to reduce / eliminate 

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Risk management- insurable, internal and external

Insurable risk:

  • insurance can be taken out agaisnt some risks 

Business interruption insurance- used to cover the risk of an accident that prevents a business from running 

Key employee insurance- covers the sickness or death of a important employee 

Internal risks-

Pr failures, product failures, equipment failure, employee error 

External risks-

Economic risks, natural disaster, supply chain problem, legal challenges

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Risk management- contingency planning and crisis m

Contingency planning and crisis management

- a contingency plan is a plan of action to be followed in the event of an emergency or crisis whcih threatens to destroy/ disrupt the business 

-crisis management is an unforseen event that threatens business 

-first part of contingency planning is identifying threats and estimating the impact. Cost management time and money. identify weak points 

-Then need to take action need to test and practixe startegy 

-need to be updated and constantly reviewed 

what is the value of contingency planning?

-minimise risk and limit damage      -costly activity 

-reduces impact on customers and prtoect losses 

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PEST factors - Political

Political factors 

Instability- major objectives of government to provide a stable economic and legal framework where a business can operate and grow 

National Security- increasingly important, terrorist attacks, introduce measures that might restrict movement of good and people and capital

Major Trading Partners

Changes in government- less/more positive view to business activity, legislation, cost increases

Pressure groups- significant impact 

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PEST factors - Economic, taxation, subsidies and g

Taxation, subsidies and the governments role as purchasers of goods and services 

  • taxation    

-direct taxes, tax on income, income tax, NI, corporation tax, capital gains tax, inheritance tax

-indirect taxes, tax on spending, VAT, excise duties, customs duties, council tax

Effects on business of taxation- increasing/ decreasing level of consumer spending will have an imapct on the majority of peices, increased corporation will increase business costs, prices can be impacted by VAT

  • subsidies 

-payments to producers, reduce costs and increase output 

  • Gov expenditure

-buy good and services, main consumer for some, source of easy profits

Fiscal policy-  change in taxation and spending to influence the economy 

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PEST factors- Economic, Inflation and its effects

Inflation is the rate that general prices are rising 

  • measuring inflation     -CPI, consumer prices index, basket of goods    

-Uk is in a low inflationary period w/ low levels of inflation      

 -acheivement of target inflation is good as encourages investment and consumer spending    

 -Monitary policy commitee of BOE control inflation rate 

  • Causes of inflation     -cost push factors, related to the cost of production       

-demand pull factors, increase prices and demand increases, higher incomes and higher disposable incomes 

wage price spiral = increasing inflation targets can lead to higher wage demand, wages increase so business costs increase and levels of demand, pass on costs so prices increase, leads to demand for higher wages again, cycle repeats 

effects of inflation on business

-increased management time spent negotiating wages, discourage investment as uncertianty, increae menu costs, reduce real costs of paying loans 

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PEST factors - Economic, effects of deflation, int

  • effects of deflation 

-demand in consumers will fall, falls im wage levels, decrease investment, limit economy growth, increase debt 

interest rate is the price of borrowing and saving money 

  • effects on businesses of changing interest rates 

-not generally impacted by small changes in interest rates, but if a trend builds over time the cumalitive impact can be signifcant

-increase= pay off mortgages so less money to spend, domestic consumption falls, less likely to borrow so less spending, less investment, reduce profitability, reduce competitivness

-decrease= less spent on mortgages, more to spend, more borrowing, more spending, more investment

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PEST factors - Economic, Economic growth and the b

-Gdp, gross domestic product, measure of the level of the economic output in the UK, needs to grow to increase the standard of living , see a regular rise and fall

  • Boom 

-benefits businesses and consumers, unemployment will be low, consumer demand is strong, profits are high, budget surplus for governement caused by high tax revenues ad lower expenditure on social security

  • Downturn

-less investement, nervous about the future, cut back, high inflation in boom may cause interest rates to increase, spend less and unemployment will rise, businesses cut back on stock holding as falling sales will leave them with unsold merchandise 

  • Reccession 

-downturn into a recession, economy starts to shrink, 2 consequetive qaurters where gdp growth is negative, rapid unemployment, falling demand, decline in inflation and interest rates, product and pricing change to suit 

  • Recovery

-start to see business opps, cost of borrowing low, investment increase, new jobs created so unemployment decrease

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PEST factors - Economic, Exchange rates and their

An exchange rate is the value of one currency expressed in terms of another currency 

  • Impact of a fall in the value of the pound- depreciation 

-importers, imports more expensive to buy, reacting to this they canreduce their margins to avoid passing the increased costs on to the consumer, they could increases prices to pass the cost onto consumer as well tho

-exporters, exports will be cheaper, they can increase prices to maximise profits or keep the same to attract new customers 

  • Impact of a rise in the value of the pound- appreciation 

-importers, imports less expensive to buy, can increase margins by not passing the reduced cost onto the consumer, or they can pass on reduced costs and increase sales 

-exporters, more expensive, how the business reacts depends on their brand strength, qaulity of their goods etc 

SPICED - 

S=STRONG P=POUND, I=IMPORTS C=CHEAPER , E=EXPORTS D=DEARER

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PEST factors - Economic, Unemployment

Every economy will have a natural rate of unemployment. It does alter over time and depends on  mobility of labour, availability of training, trade union power and the skills of labour. Unemployment may be good for the economy as it will discourage those in employment seeking higher wages. 

-structural unemployment, large changes in patterns of demand or developments in technology that cause unemployment in regions ir sectors, the structure of the industry has changed, EG COAL MINING. 

-cyclical unemployment, appears as part of the business cycle, downturn= increase in unemployment, boom= decrease in unemployment, to tackle this they use wage flexibility or encourage investment into labour to make it more expenisve to shed them in a downturn. 

-frictional unemployment, least problamatic, occurs when there is a delay in finding a job after losing a previsouly held job, less long term, job centers and recruitment agencies help

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PEST factors - Social- demographic change, lifesty

-demographic change, measure the changing structure of the population, first important factor is the overall size of the population, as population increases so will the market, ageing population, baby boomers, impacts demand patterns, migration is also important 

-Lifestyle change, provide businesses with opps and threats, one major change is the amount of economically active women, do not comply with the old fashioned house wife roles, society is becoming more health conscious, younger people consume media and purchase goods is a problem as they switch between products hard to market all, cultutral changes, social changes and fasion taste changes, changes in the attitude towards the environement, social enterprises 

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PEST factors- Tech, automation

"the application of science to solve problems" new technologies will have to become an integral part of operations if they are to stay competetive. 

Automation - robots carrying out repetitive tasks 

Retailers: key issue with effeciancy, automated ordering or self checouts

Banks: bank clerks being replaced by machines 

Warehousing: robots replacing staff as quick and do more 

Online services: whole systems automated, mathematical analysis will determine which products are marketed 

Utilitites: smart meters 

advantages- lower employee costs, less wages ad no sick/ holiday pay, increased productivity as faster production, incresed repeated qaulity, less management time spent on disuptes 

disadvantages- environmental impacts, socail costs, investment costs 

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PEST factors - Tech ICT

-Internet marketing, internet sales increase year by year, share values rocket, as well as sales, 

-Web based customer relationships, financial industry, all done over the internet, gambling industry

-B2B, involves finding commercual buyes for business output and the sourcing of components and raw materials for business production via the internet, allow full supplier relationships to be maintained 

-MRP2, manufactoring resource planning 2, system used by businesses to plan all aspects of business activity, takes forecasts and turns them into a series of objectives and targets for each funcion or department in an organistaion, can replace an entire layer of management, what ifs, reduces costly errors

-Electronic point of sale systems, EPOS, reading of barcodes at chexkouts, stock data base that controls sotckholding and ordering for reatailers, 

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PEST factors- Tech CAD AND CAM

CAD, computer aided design, interactive computer system, capable of generating storing and using geometric and computor graphics, solve design problems, reduced lead-in time (length of time between the initial design concept and actual production), more competitive, all possibilities to be tested, identify probelms at an early stage

CAM, computer aided manufacture, control of machinery, flexibility in production, cut costs in small businessess too, minimise waste etc 

Impact of tech on businesses:

-product life cycle and speed of technological obsolescence, as development is quicker, shorter life cycles, products must be profitable much quciker, early adopters may be critical for this 

-location of business and ict, outsource/ relocate their operations worl wide to cut costs, call centers

-Outsourcing production, quality can now be closely monitored, large businesses can reduce financial risk by etting other people to manufacture for them,

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PEST factors - consumers and technological change

benfits - easy price comparison, more infomation, more choice, lower prices, improved quality, convieniance 

problems- lead to fraud, phone calls selling things arent favoured, pressure from rapid tech change could lead to debt 

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Ethical factors

Ethical issues, being ethical means you consider all stakeholders, realise socail resposibilityies and know your moral rights and wrongs, 

-employees: treated as most valuable asset, take care of h+s, conditions of work and living wage, thosw working for suppliers are easily as important 

-suppliers: treated fairly sticking to agreed contracts and not forcing renegotiation, dont put pressure on cash flow 

-customers:quality product at fair price 

-environemnt and animals 

CSR , corporate socail responsability, responsibility that goes beyond making profits for their shareholders monitor and take responsibility for impact on social and environ 

- audit 

-questions they would ask , human rights? discrimination? legislation? competing fairly?

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Ethics and profitability

BAD- costs likely to rise , living wage, increase labour costs, improved conditions 

        - revenues to fall, 

GOOD - customers attarcted to ethicalness, boost sales 

            -improve PR 

Can a business be truly ethical? 

-forced to take socail responsibility, legislation, profit is main concern usually, social enterprises, private sector, ethics after profit, depends on situatuion short term and long term, depends on size of business, 

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Legal factors

without a strong legal framework will operate in a way that will maximise their profits and this is likely to be a detrimental to many groups 

COMPANY LAW- incorporated= sperate legal entity Ltd or Plc responsible for own debts and liabilities, employ secretaries, failure can lead to fines or liquidation, 

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Comments

FrankoPesto3

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I've been shopping at monkey mart for years, and it's amazing to see how they've adapted to rapid changes in technology and consumer preferences. Their flexible workforce and innovative products keep me coming back for more!

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