A-Level Edexcel Business 3.6

What is Scenario Planning?

The process of identifying and anticipating changes and planning ways to deal with them.

- Usually for critical, and uncertain situations

What are the 3 Common Hazards in Risk Assessments?

- Natural Disasters

- IT Systems Failure

- Loss of Key Staff

Why are Natural Disasters a Hazard?

Natural Disasters are often unpredictable but their impact can be so devastating to business operations that they are a common element of risk assessments.

(e.g. Storms)

Why is IT Systems Failure a Hazard?

Information technology systems are used extensively by most businesses and an IT systems failure can have a devastating effect on a business's ability to carry on operating normally.

(e.g. A Data Breach)

Why is Loss of Key Staff a Hazard?

Losing key members of staff can cause difficulties especially if they are unplanned (e.g. as a result of sudden illness or incapacity)

Loss of experience and knowledge can impact a business competitive edge with things such as business contacts and relationships with customers and suppliers possibly being lost.

What is Risk Mitigation?

Identify and assess risks, and then prioritise and plan responses to those risks

What is Risk Acceptance?

A strategy in which the organization accepts the potential risk, continues to operate with no controls, and absorbs any damages that occur

What is Risk Avoidance?

Avoiding an act that would create a risk.

What is Risk Limitation?

A strategy in which the organization limits its risk by implementing controls that minimize the impact of a threat

What is Risk Transference?

A process in which the organization transfers the risk by using other means to compensate for a loss, such as by purchasing insurance

What is Business Continuity?

The ensuring of a business to continue running even after significant events such as loss of internet.

- It is about devising plans and strategies that will enable the business to continue operations and recover from any disruptions

What is Succession Planning?

Identifying and developing current employees who have the potential to occupy key roles in a business in the future.

What are the Uses of Succession Planning?

+ Motivates these employees as there is room for progression (Maslow)

+ Helps to pick the correct successor that can do the work effectively

+ Business continuity - Business can quickly react to loss of key staff

+ Productivity may increase if a skilled worker is promoted

+ Some roles require job-specific experience

What are the Limitations of Succession Planning?

- Time consuming as time is spent on researching candidates

- Costly to improve wages and bring in a new candidate to replace the one who's moved

- They don't bring innovation from other companies

- Can be demotivating if an employee is not part of the succession plan

- Staff can become complacent if they know they are part of the succession plan

- Opportunity cost - time spent on succession planning/mentoring

What is Effective Change Management?

Involves identifying, organising and implementing new methods of working to a business.

What Factors affect Business Change?

- Organisational Culture

- Organisation Size

- Pace of Change

- Resistance to Change

How does Organisational Culture affect Business Change?

To successfully implement change, leaders must understand the culture of their organisation and work to align it with their desired changes.

- An innovative and flexible culture may mean that employees are more open minded to change

- In a hierarchical culture communication may be limited and information may not be easily accessible to all employees

- Organisational culture can affect the adaptability of a business

How does Size of the Organisation affect Business Change?

Larger organisations usually have complex structures which can make change more difficult to implement.

- Larger businesses often have more resources available to support change initiatives such as financial resources, technology and experienced staff

How does Speed of Change affect Business Change?

If the pace of change is too fast >

- It can create resistance from overwhelmed workers who feel unprepared and that they don't have enough time to adjust

If the pace of change is too slow it can result in >

- A lack of innovation and adaptability, leading to a loss of momentum and delays etc

How does Resistance to Change affect Business Change?

Businesses attempting to implement change are likely to face resistance from a range of stakeholders such as:

- Employees

- > May worry about how the change will affect their job security or work environment

- Owners

- > May fear that changing their current processes may cause disruption to their daily operations and affect productivity

- Customers

- > May be hesitant to try something new or unfamiliar

- Suppliers

- > May be reluctant to change their processes or systems

Which ways can businesses Reduce Resistance to Change?

- Deliver Training Programmes

- Focus on the Positive aspects of Change

- Design Flexibility into the change, giving employees the ability to Adapt

- Involve Employees who Might be impacted by the Change

What are the Internal Causes of Change?

- A change in business size

- Poor performance

- New ownership

- Transformational leadership

- > A style that inspires and motivates employees to achieve a shared vision, focusing on positive change rather than just rewards

- Business restructuring

What are the External Causes of Change?

- Changes in the market - Such as new entrants to the market as mentioned in Porters 5 Forces

PESTLE ->

- Political change

- Economic change

- Social change

- Technological change

- Legal change

- Environmental change

What factors can Change affect in Businesses?

- Competitiveness

- Productivity

- Financial Performance

- Stakeholders

How does Change affect Competitiveness?

- Change as a result of some internal factors (e.g. following poor performance or the arrival of a new leader) can be rapid and can lead to swift improvements in competitiveness.

- Change as a result of external factors is more likely to be gradual and involve a business carefully selecting and pursuing an appropriate long-term competitive strategy .

How does Change affect Productivity?

- In the short-term, as change is being implemented and employees get used to new processes, surroundings, leadership or a new product, productivity is likely to be reduced

- Once changes are embedded, productivity is likely to return to earlier levels and possibly improve , especially if new technology is part of the change

How does Change affect Financial Performance?

In the short-term, the implementation of change can be very expensive for several reasons:

- Market research and product development require investment

- Organisational restructure may involve redundancy payments as well as recruitment and training costs

In the longer term, financial performance is likely to improve as change becomes the new way of working

How does Change affect Stakeholders?

- Some changes such as seasonal fluctuations or cyclical economic factors can often be planned-for and their impacts on stakeholders considered in advance

- Significant long-term change is likely to involve a wide range of stakeholders at some level. e.g. thousands of employees being made redundant as result of Debenhams being taken over by Frasers Group Plc