Change
Business: BTEC Level 3 National Extended Diploma, topic 5.3.1
Causes of Change in a Business
Business change occurs when any process, system or structure within the business is changing.
Organisational size
- An organisation changing size is an example of business change.
- A business may have to shrink and make people redundant if revenues are lower than expected.
- If a business is growing, then the organisation may need to hire more people and change its recruitment processes.
Poor business performance
- Poor business performance can result in business change as leaders are likely to introduce measures to reduce cost which may include restructuring and redundancy.
New ownership
- New ownership can result in business change if leaders have a different vision to previous owners.
- For example, Palmer Luckey, who founded Oculus VR was fired shortly after joining Facebook (after it bought Oculus).
Transformational leadership
- Transformational leadership can result in business change as employees are given opportunities to suggest changes and these may be implemented by managers and leaders.
The external environment
- The external environment (PESTLE) may result in business changes as businesses must respond to internal and external changes to maintain competitiveness.
- For example, technological advances are part of the external environment and many supermarkets have introduced self-checkouts to take advantage of this technology.
- In many cases, the introduction of technology has resulted in reducing staffing and making redundancies.
Impact of Change
Business change can impact several aspects of a business:
Competitiveness
- Business change can impact a business' competitiveness.
- Any change which results in lowering unit costs can allow the business to reduce its selling price.
Productivity
- Business change can impact productivity if the change involves replacing human labour with technology.
- Car manufacturers replaced lots of workers on their assembly line with robots made by businesses like KUKA.
Financial performance
- Business change can impact financial performance as change which results in lowering costs can improve profitability.
Stakeholders
- Business change can impact stakeholders as employees may become concerned about their job security although shareholders may see increased dividends if profitability increases.
Test yourself on Change
If an organisation needs to reduce its size, what may happen to some employees?
Why can lowering costs lead to a business becoming more competitive?