Business component 3

Causes of change in a business

Size of the business, a change in ownership, developments in technology, market changes, consumer tastes, legislation, changes in the workforces, changes in the economy

Internal causes of change (Initiated by the business)

Restructuring, delayering, management, expansion/ retrenchment

External causes of change (outside the business)

Social trends/ attitudes, economic conditions, laws/ regulations, technological advances

Planned change

change activities that are intentional and goal oriented

Unplanned change

change that is imposed on the organization and is often unforeseen

Change in business

Production methods and updating equipment, developing new products, meeting legal requirements, retraining the workforce, the need to look for new markets

The importance of managing change effectively

it plays an important role of increasing productivity, service, input and returns to a business

Different approaches to managing change

Incremental change, step change

J. Storey's 4 different approaches to managing change

1. total imposed package (top down, no consultation)

2. negotiated total package (consultation between managers and staff)

3.Imposed piecemeal initiative (top down, no consultation, gradual change)

4. negotiated piecemeal initiative (consultation between managers and workers, change is gradual)

Reasons for resistance to change

Parochial self interest, misunderstanding, low tolerance of change, different assessment of the situation

Ways of removing resistance to change

-act decisively, demonstrate momentum

-consider how they will be affected

-involve them in the change

-consult and inform frequently

-be firm but flexible

-monitor the change

Lewin's 3 step process for removing resistance to change

1. unfreezing the status quo or present state

2. movement to a new state

3.refreezing the new change (state) to make it permanent.

Changes in organisational culture

business performance, new leadership/ strategy, change in external environment, to support change management

Role of leadership

create clear vision, align organisation to delivery strategy, embody the change-symbolic leadership

Impact of change on a business and it's stakeholders

owners may earn less dividends in the short-term, managers may need to learn new skills, employees' jobs might be lost and customers may have less choices of goods and services.

Risks that businesses are likely to encounter

Natural disasters, Failure of equipment/technology, Employee error, Supply problems, Economic factors, Legal changes, Public relations, Product failures

The importance of risk assessments as a tool for avoiding risks

-Greater Awareness of Risks in the Workplace

-Employee Education

-Identification of Likeliness and Scale of Potential Risks

-Determine What Actions Are Required

-Proper Documentation

-Help With Budget Allocation

Preventative actions to avoid risks

installing water sprinklers, backing up IT data, training employees

Insurable risks

When a company is able to be insured and can therefore work out the premium they mus pay

Uninsurable risks

When an insurance company cannot calculate the probability of the risk and therefore cannot work out a premium that the business must pay

Contingency planning

minimise the impact of a significant foreseeable event and to plan for how the business will resume normal operations after the event.

Contingency planning involves:

Preparing for predictable and quantifiable problems

Preparing for unexpected and unwelcome events

Crisis management

Dealing with unexpected and usually unwelcome events.

Possible responses of a business to potential risks

Avoid - eliminate the threat to protect the project from the impact of the risk. An example of this is cancelling the project.

Transfer - shifts the impact of the threat to as third party, together with ownership of the response. An example of this is insurance.

Mitigate - act to reduce the probability of occurrence or the impact of the risk. An example of this is choosing a different supplier.

Accept - acknowledge the risk, but do not take any action unless the risk occurs. An example of this is documenting the risk and putting aside funds in case the risk occurs.

How political factors affect business activity

- Governments can raise or lower corporation tax , which will impact on profits. They can also affect businesses by increasing value-added tax on products or business rates.

-They can bring in new laws like the National Minimum Wage, which impacts on profits and employment rights.

-The vote to leave the European Union, also known as Brexit will have an impact on the way UK firm's trade with the EU single market.

The role of the government in providing a stable framework in which businesses operate

Government provides the legal framework and the services needed for a market economy to operate effectively. The legal framework sets the legal status of business enterprises, ensures the rights of private ownership, and allows the making and enforcement of contracts.

How businesses are affected by taxation

It will reduce the consumer's disposable income (income after income tax). This means people will have less money to spend on goods and services, resulting in lower demand and sales revenues for the business.

How businesses are affected by subsidies

the effect is to reduce price and increase output.

How fiscal policies affect businesses

Fiscal policies: government actions, including new taxation and spending policies, designed to influence the economy through aggregate demand.

-During an expansionary period of fiscal policy, taxes are reduced, which can boost business profits.

How monetary policies affect businesses

Monetary policy: involves the use of interest rates and changes to the money supply to achieve relevant economic objectives.

-The main objective of monetary policy has been keeping inflation low and stable.

Why governments legislate and regulate business activity

Legislation is a set of laws put in place by the government to protect businesses, employees and consumers. Businesses must operate within these laws to ensure the fair and safe treatment of any party involved with a business.

Importance of the government as a purchaser of goods and services from the private sector

raises aggregate demand and increases consumption, which leads to increased production and faster recovery from recessions

Relationship between government and businesses

Public policies, including regulations, taxes, and programs, have a substantial influence on the economy and the environment in which businesses operates.

How economic factors affect business activity

+unemployment-an economy is not making full use of the workers that are available. The economy will not grow as quickly as it could, and it may start to slow down

+changing levels of consumer income-If consumer incomes increase, general spending is also likely to increase. An increase in spending will help businesses expand, lower unemployment and improve the economy. However, if consumer incomes fall, spending is likely to decrease. This means that businesses will not perform as well, unemployment will rise and the economy will be less stable.

+interest rates-Customers may be less likely to spend if interest rates increase, as they would benefit from having money in a savings account and will be less likely to take out a loan

+tax rates-Shareholders and owners will receive higher dividends and profit if taxes are low. If taxes increase the opposite may happen.

Economic growth

an increase in the value of goods and services produced by an economy over time.

The business cycle

Boom: high levels of consumer spending

Recession: falling levels of consumer spending

Slump / depression: a prolonged period of declining GDP

Recovery: things start to get better; consumers begin to increase spending

GDP

the value of all newly produced final goods and services produced in an economy within a given time period.

Inflation (measurement and causes)

-sustained increase in the average price level of an economy.

-The rate of inflation is measured by the annual percentage change in the level of prices. In the UK this is most commonly measured by the consumer price index.

-production costs, demand, fiscal policy

Interest rates

reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed.

Exchange rates

the value of one currency expressed in terms of another.

Unemployment

The extent to which people who are are able and willing to find work are not able to find employment.

Impact of the business cycle on businesses and their stakeholders

it directly affects demand for their products.

-For example, a business that relies on consumer spending for its revenues will find that demand is closely related to movements in GDP. During a boom, such businesses should enjoy strong demand for their products, assuming that the products are actually what customers want! But during a slump, the business has to "ride out the storm" - suffering a sharp drop in demand

Demographic change

Ageing Population:

Some possible business implications are:

Greater demand for services to support older people (e.g. healthcare)

High levels of net immigration:

Some possible business implications are:

Higher costs of (but greater demand for) public services (e.g. education, health, housing)

Increase in size of labour force - potentially keeping wage rates low

How social factors affect business activity

-demographics: Demographic change is most commonly used to reflect changes in population such as birth rate, life expectancy and levels of immigration.

-lifestyles: We are more health-conscious so healthy foods and habits are becoming more important to customers. Food packaging lists nutritional information. More electronic products such as pedometers and fitness trackers are being used.

-tastes and trends

How automation affects business activity (technological factors)

Automation- introduction of machines to do work that was previously done by people. e.g introduction of self-scan checkouts in supermarkets means that fewer employees are needed on the tills. With driverless cars and deliveries by drone on the way, businesses will need to think about how many people they employ and which new jobs will be needed to support advances in technology.

How communication technology affects business activity

increase the productivity of workers and investments, promote the interdependence of industries, allow the deployment of new technologies, and accelerate economic activity

Business ethics

Using ethics when making business decisions

-Define acceptable conduct in business

-Should underpin how management make decisions

Ethical issues

Environmental rights, animal rights, treatment of workers, suppliers and customers

Corporate responsibility

the impact an organisation makes on society, the environment and the economy.

Social responsibility

moral obligation on a company or an individual to take decisions or actions that is in favour and useful to society