Need For Change

Business Change

The adoption of a new idea or behaviour by an organisation. Businesses must continually adapt to improve performance and remain competitive

pressures for change

• Internal pressures for change: issues with employees, management, processes and systems, financial performance, or corporate culture

• External pressures for change: competitors, technology, customers, legislation, economy, globalisation, social expectations

proactive approach

Occurs when a business makes a change to avoid future problems or take advantage of an opportunity (e.g. fill a market gap, respond to emerging trends, invest in new technology)

• brings fewer pressures because the business chooses the timing, allows for a calmer, more controlled implementation and reduces resistance

• Involves low-risk strategies

reactive approach

Occurs in response to a situation or crisis that is essentially forcing the business to change (e.g. competitors, negative public view/criticism, unexpected crises such as operational faliures)

• Brings greater pressure because the business must respond quickly to protect performance and reputation, and often results in a rushed, less planned implementation, with fewer ideas considered and a focus on damage control

• Involves high-risk strategies

key performance indicators

Criteria that measure a business’s efficiency and effectiveness in achieving its different objectives

• Highlight when change is needed, provide a reliable measure of performance over time, and helps evaluate the success of implemented changes

Percentage of market share

measures the proportion of a business's total sales compared to industry sales, expressed as a percentage

• Measures sales proportion, shows competitiveness, and is used to assess performance

Net profit figures

calculated by subtracting total expenses incurred from total business revenue  earned over a specific period of time

• Measures profit, shows financial performance, and indicates business success

Number of customer complaints

counts how many customers report problems or dissatisfaction in a given period 

• Indicates satisfaction levels and shows quality of output; not all customers complain, but acting on complaints helps retain customers and prevent business failure

Rate of productivity growth

the change in the total output produced from a given level of inputs over time, expressed as a percentage figure

• Measures efficiency change and improvement signals strong performance; good productivity reduces costs, improves operations and strengthens competitiveness

Number of sales

the total quantity of goods and services sold by business over a specific period of time 

• Measures customer demand, indicates customer satisfaction, shows market performance, links to financial objectives, and improvement signals success

Rates of staff absenteeism

the average number of days employees and not present on scheduled to be at work, for a specific period of time 

• May be caused by illness, personal leave, family issues, stress, job seeking, and entitlement mentality

• High absenteeism can increase costs, reduces productivity, and disrupts workflow. Can be used to assess staff morale and corporate culture

Level of staff turnover

the percentage of employees that leave a business over a specific period of time and must be replaced 

• Used to assess staff morale, employee satisfaction, and the quality of workplace relationships

Workplace accidents

measures the amount of injuries and unsafe incidents that occur at a work location over a specific period of time 

• A high amount of accidents can lower morale, reduce motivation, increase staff absenteeism and turnover, stop production, reduce efficiency, and damage the business’s reputation 

• Common causes for accidents include old or faulty equipment, poorly trained employees, dangerous nature of work tasks, and unsafe working practices

Level of wastage

the amount of inputs and outputs that are discarded during the production process, measuring how efficiently a business uses its resources during production

• High wastage can raise expenses, reduces profits, and reflects poorly on the business’s environmental sustainability and CSR, whereas low wastage shows an efficient, cost-effective production process and a business that values sustainability

Number of website hits

the amount of customer visits the business’s online platform recieves for a specific period of time 

• Indicates the level of customer engagement and interest in the business and its products

Force Field Analysis

A theoretical model that determines if businesses should proceed with a proposed change using four steps, analysing forces that push and hold back change

• Helps businesses make a clear, structured decision about whether to proceed with change by identifying the factors that support or resist it, increasing the likelihood of successful implementation through early management of restraining forces

Advantages of FFA

• Helps assess whether a change is likely to succeed

• Considers the whole business; more informed decisions

• Identifies sources of internal resistance so they can be adressed

• Increases the likelihood of successful change

• Can save time and money

Disadvantages of FFA

• Can be time-consuming

• Requires business resources, increasing costs.

• May not accurately predict all factors affecting change.

• Results depend on the quality and accuracy of the analysis.

• May delay implementation while the analysis is being completed.

Step 1: Weighting

The business identifies the driving and restraining forces affecting a proposed change and assigns each a numerical rating (1–5) based on its level of influence, helping determine which forces will have the greatest impact on the change's success.

Step 2: Ranking

The business ranks the relevant driving and restraining forces from strongest to weakest based on their weighting to identify which forces have the biggest impact on the change, helping managers prioritise their focus.

• A change can only be successful if the driving forces outweigh the restraining forces

Step 3: Implementing a response

The business must decide how to respond to the change after weighing and ranking, taking action to strengthen driving forces, reduce restraining forces, and carry out the proposed change through a structured action plan.

Step 4: Evaluating a response

The business reviews whether the strategies actually worked, assessing if the driving forces became stronger, restraining forces weakened, and if the change succeeded, ensuring the business learns from the process.

• Determines whether the actual change matches the anticipated change, and whether it was successful or further action is needed

Driving Forces

The factors in a business environment that promote and support change. They encourage a business to move from its current state to a desired future state, help justify the need for change, and provide momentum for implementation

Owners

the highest level of management and make major business decisions and the business’s future. They want the business to succeed and grow, having a financial interest in good performance

• Owners will support change that helps the business stay competitive, pushing for change if they believe it will improve results

Managers (D)

ensure the business is performing and meeting business objectives, overseeing operations, policies, and long-term goals

• Managers support change when it will improve performance or help achieve objectives, as well as if it will protect job security or improve financial performance

Employees (D)

the people a part of the business who perform tasks to help achieve goals and objectives, with a personal interest in the business’s success because it provides income and job security

• Employees will support change if it improves their working conditions, training, wages, benefits, opportunities, safety, or job satisfaction.

The pursuit of profit

the desire to increase a business’s level of revenue compared to expenses beyond its current point.

• Businesses will support change that will increase revenue or improve financial performance, helping to meet shareholder expectations, support reinvestment, and stay profitable.

The reduction of costs

the desire to minimise operating costs and remove unnecessary expenses to increase profit margins. 

• Business will support change that will improve efficiency, effectiveness, and productivity while reducing costs and expenses

Competitors

the direct rivals of a business in the same market. They influence how a business operates and performs in its market

• Businesses will support change that puts them ahead of competitors and their actions, such as price changes, new technology, and advertising

Legislation (D)

the laws and regulations that all businesses must follow in order to avoid fines, penalties, suspension, or closure

• Legislation may drive or force businesses to change if laws are changed or if a current business practice breaches legislation

Globalisation

when businesses compete in a global market instead of locally or nationally, therefore reducing trade barriers and facing more competition

• Businesses will support change involving globalisation if it allows them to produce goods in cheaper or more efficient countries. Globalisation also allows for greater customer reach, and new markets and opportunities

Technology

the equipment, devices or programs that help a business to become more efficient, effective, and productive

• Technology is always advancing, so it constantly pushes businesses to change and improve, allowing them to reduce costs and improve the quality or speed of operations, helping to stay competitive

Innovation

improving existing products and services or creating new ones

• Businesses innovate to stay ahead of competitors and meet changing customer needs, helping increase sales, market share, and competitive advantage, and preventing falling behind in the market

Societal attitudes

the views, values and opinions of the general public and a business’s customer base

• Societal attitudes change, so businesses must adjust how they operate to match what people expect. Not adapting can lead to lost sales and reputation damage

Restraining Forces

The factors that resist a business change or actively try to stop it. If restraining forces exceed driving forces, a business change is unlikely to be succesful. For a business change to be successful, businesses have to implement strategies to overcome the relevant restraining forces

Managers (R)

may resist change if they don’t support it, don’t believe it will benefit the business, or if it threatens their role, authority, or job security. 

• Because managers hold significant decision-making power, their resistance can block or delay change, and overcoming this force often requires negotiation, compromise, or adjusting the proposal to gain managerial support

Employees (R)

may resist change if the outcome feels uncertain, they don’t understand its purpose, if they fear they cannot adapt if new skills are required, or if it impacts their job security, routine, or working conditions

• Employees may actively oppose change through actions such as industrial action, so to overcome this force, managers must use strong leadership, communication, and incentives to build support for the change

Legislation (R)

can restrict or block a proposed change if it does not comply with laws or regulations. Businesses must follow legal requirements to avoid fines, penalties, suspension, or closure.

• To overcome this, a business may need to apply for licenses, obtain permits, or update contracts and agreements to meet legal standards. Some legislative barriers cannot be overcome, meaning the business must alter or abandon the change.

Organisational inertia

happens when a business has been operating the same way for a long time, making a change difficult. Established processes, routines, and structures make stuff comfortable with the current way of working. 

• This creates rigidity, meaning employees and systems resist new directions. To overcome this, a business may need to change leadership, restructure, or create environments that support new ideas

Time

can restrict how quickly or effectively a business can implement change. Deadlines may come from legislation, financial pressures, competitors, or shifting societal expectations

• Limited time can make planning, training, or restructuring more difficult, causing resistance to the change. To overcome time as a restraining force, a business may adjust the timeline, implement the change in stages, or bring in external support to speed up the process

Financial considerations

involve the costs of new equipment, training, redundancies, or restructuring that a business change incurs. 

• A business must ensure it has sufficient funds to implement the proposed change, or consider raising additional finance or modifying the change to suit its financial position.

Porter’s Generic Strategies

Explain how a business can gain a competitive advantage by choosing one clear strategic direction – either Lower Cost or Differentiation – rather than trying to do both. Porter’s theory helps the business decide which strategic direction will best strengthen its competitive position

Lower Cost Strategy

When a business offers products at similar or lower prices than the industry average while still remaining profitable, achieved by having the lowest cost of operations compared to competitors. This strategy works best in industries with many cost-conscious customers who have little brand loyalty and mainly choose the cheapest option.

the three pricing approaches

• Charging similar prices to competitors (higher profit margins)

• Charging slightly lower prices than competitors (higher profit margins, slightly lower cost-saving per unit)

• Charging much lower prices than competitors (thin profit margins are outweighed by a high volume of customer sales)

Ways to reduce costs

• Reducing operating costs: Produce basic products, minimise marketing expenses, use overseas manufacturing and automation to lower labour costs, and invest in renewable energy to reduce long-term operating expenses.

• Reducing the cost of supplies: Purchase supplies in bulk, source cheaper materials globally, use Just In Time (JIT) inventory management to reduce storage costs, and purchase high-quality inputs to minimise replacement and defect costs

Advantages of LC

• Attracts price-sensitive customers.

• Creates barriers to entry for competitors to match lower prices.

• Reduces operating costs and improves efficiency.

Disadvantages of LC

• Basic products may not meet all customer needs.

• Low brand loyalty as customers switch brands for lower prices.

• Low prices can reduce perceived quality.

• Requires highly efficient operations.

• Thin profit margins increase financial risk.

Differentiation Strategy

Involves offering customers unique services or product features that are perceived as value to customers, which can then be sold at a higher price than competitors. This suits markets where customers are not price-sensitive and are willing to pay more for unique features, and is effective when specific customer needs are unmet or underserved in the current market, increasing competitiveness.

• Ways a business can differentiate include introducing new technology, innovating existing products, improving durability, building a strong brand image, and using niche marketing

Advantages of diff.

• Builds strong customer loyalty through unique products or services.

• Motivates employees by promoting innovation and quality.

• Encourages repeat purchases and allows the business to charge premium prices.

Disadvantages of diff.

• Competitors may imitate the point of difference over time.

• New employees may need extra training to deliver the unique features or service.

• Requires greater investment in research, innovation, and employee training.

• Higher prices may discourage price-sensitive customers.