KK1: Business Change – Proactive and Reactive Approaches

The Concept of Business Change

• Business change: The alteration of behaviours, policies and practices of a business.

• Formal definition used in VCE BM: Transitioning individual employees, working teams, functional areas, or the entire organisation to a new state of operation.

• Core idea: organisations are dynamic and must evolve to improve performance or remain viable.

• Typical manifestations of change
  • Changing products/services to better satisfy emerging customer needs.
  • Relocating production (e.g., overseas) to exploit cheaper labour.
  • New manager introducing a different management style.
  • Automating production lines to lift efficiency.

Examples & Illustrations of Business Change

• Brick-and-mortar retailers adapting to online competition from platforms such as eBay & Amazon.

• Video-rental stores (e.g., Blockbuster) attempting to survive in the age of Netflix & other streaming services.

• Traditional taxis / hotels facing disruptive forces like Uber & AirBnB.

• Historical cost comparison: a 3-minute London–New York phone call in 1930 cost $245$ (illustrates technological progress & price change over time).

Sole Trader Case Illustration

Bullet-proofing a small hospitality business against environmental forces:

• Legislative COVID-19 changes → PPE, takeaway-only trading, socially-distanced table layouts.

• Technological shifts → new website with on-line bookings, social-media pages (Facebook/Instagram), contact-less payment options (PayPass / payWave).

• Competitive entry (new café on the same street) → price reductions, loyalty-scheme introduction.

Contemporary Case Study – Qantas (Valid to 2024)

• 19 Mar 2020: Australian borders closed to non-citizens/residents (Prime Minister’s media release). Objective: “slow the spread of coronavirus to save lives.”

• Consequences for Qantas: near-cessation of international operations.

• CEO Alan Joyce’s 3-year recovery program targeting $15\text{ billion}$ in cost savings, incl.
  • Cuts to workforce costs – $9000$ redundancies, lengthy stand-downs, outsourcing of baggage-handling.
  • Asset/storage changes – sending $12$ Airbus A380s to the Mojave Desert & parking ≈$100$ other aircraft (lower ongoing maintenance).
  • Early retirement of Boeing-747 fleet.
  • Provision of PPE & training for all remaining staff.

• Significance: demonstrates large-scale reactive & proactive responses – forced by crisis yet structured as a long-term strategic repositioning.

Proactive Approach to Change

• Definition: A business acts in advance to avoid future problems or seizes an opportunity to gain competitive advantage.

• Linkage: Directly aligns with Porter’s Generic Strategies (U4 AOS2) – e.g., differentiation or cost leadership require foresight.

• Hallmarks
  • Planned, deliberate, controlled; minimal crisis-pressure.
  • Typically positions firm ahead of competitors.

• Illustrative proactive moves
  • Spotting and filling a market gap (e.g., rapid expansion in home-delivery meal kits).
  • Recognising trend toward electric vehicles and launching an EV product line.
  • Investing early in robotics / automated production lines.

• Ethical/strategic upside: avoids disruptive shocks; builds resilient culture open to innovation.

Reactive Approach to Change

• Definition: Business responds to a situation or crisis that has already occurred (e.g., KPI decline, negative publicity, external shock).

• Features
  • Urgent, pressured, sometimes uncoordinated.
  • May involve firefighting rather than strategic planning.
  • Essential for survival when threats emerge.

• Typical triggers & examples
  • Profits drop by $50\%$ → cost-cutting program initiated.
  • Competitor launches disruptive product & steals sizeable share → imitate/innovate quickly.
  • Media exposes product health hazard → immediate recall & redesign.

• Ethical risks: hasty decisions can harm staff morale (e.g., sudden layoffs) & reputation if handled poorly.

Comparing Proactive vs Reactive Change

Similarities

• Both initiated/led by managers utilising change-management skills (communication, negotiation, planning).

• Both aim to maintain/improve competitiveness & profitability.

Differences

Distinguishing Statement (2-mark exam style):
“A proactive approach occurs when a business acts in advance to prevent future problems or seize an opportunity, whereas a reactive approach involves implementing change in response to a crisis or situation that has already impacted the organisation.”

Assessment Insight & Sample Questions

• Multiple-choice checks:
  • Definition of business change (correct answer: C).
  • Identify proactive scenario (gap in market → answer D).
  • Identify reactive scenario (competitor steals 20 % share → answer A).

• Short-answer exam command word “Distinguish” – allocate 2 marks: 1 for defining first concept, 1 for clearly contrasting with the other.

Key Terms & Summary (Cheat-Sheet)

• Business Change – transition to new operational state.

• Proactive Approach – advance action for opportunity/avoidance.
  Example: $\text{R}\&\text{D}$ investment in autonomous tech.

• Reactive Approach – response to crisis/situation.
  Example: product recall after safety scare.

Connections to Broader Curriculum & Real-World Relevance

• Aligns with U4 AOS2: KPIs measure need for change, and Porter’s Generic Strategies guide proactive competitive moves.

• Links to HR (U4 AOS1) – change affects staff morale, necessitating change-management strategies & consideration of ethics (e.g., large layoffs like Qantas’ $9000$ redundancies).

• Operations Management – proactive automation vs reactive maintenance shutdowns.

Ethical, Philosophical & Practical Implications

• Ethical: duty of care during change (fair redundancy packages, transparent communication, PPE provision).

• Philosophical: embraces continuous improvement paradigm; firms that learn & adapt thrive (Darwinian analogy).

• Practical: cost-benefit analysis critical; not all proactive spending guarantees returns, while late reactive moves can erode goodwill.

Numerical & Statistical References (with LaTeX)

• Historical call cost: ${\$245}$ for a 3-minute London–NY call in 1930.

• Qantas cost-saving target: ${15\text{ billion}}$ over 3 years.

• Workforce impact: ${9000}$ redundancies announced.

• Aircraft storage plan: ${12}$ Airbus A380s to Mojave Desert + $\approx100$ additional aircraft grounded.

• KPI deterioration example: profits falling by $50\%$ triggers reactive action.