VCAA Business Management Implementing change

In 2025 a new managing director of Kmart was appointed. In her new position she demonstrated the importance of leadership during a period of change management by positively motivating and influencing her employees towards the achievement of business objectives.

In particular, she made sure to build a shared vision with her employees (which was to increase the net profit of the business from ＄11 billion to ＄20 billion) to unify the employee efforts in Kmart stores all across Australia towards achieving this objective. In doing so, she also facilitated ongoing communication with all store team leaders, establishing the strategic changes that she intended to implement. This included changing the layout of the stores to bring beauty and clothes to the front in order to attract new customers such as those in Gen Z. This was done through regular meetings and e-mails so that all employees were aware of both the changes and the reasons that the changes were occurring (the justification for the changes).

She also provided ongoing support by encouraging collaboration and demonstrating genuine care for the wellbeing of employees, honouring their input as well. Ultimately by acting as an inspirational role model, her leadership helped to position Kmart for success during the period of change in the layout of the stores. She reduced employee resistance to change through open and honest communication as well as encouraging them to be empowered and get involved. This is why leadership is so important during change management – it helps to overcome employee resistance and ensure successful implementation.

Answers could include:

• innovation can change and improve how a business operates and/or manufactures, distributes and markets its products
• can occur when businesses change current processes involving the way they produce or deliver a product
• product innovation can also occur when businesses adopt new ways of producing, for example, using automation instead of hiring people
• innovation in a business's process can increase its efficiency and reduce costs of production, thereby increasing profit levels.

Answers could include:

• innovation can drive business growth and allow domestic businesses to expand into overseas markets, enhancing global market presence
• innovation can give businesses a competitive edge and ensure that they are visible in global markets as they offer new and different products/practices
• innovation can lead to a business's success in global markets when it engages with more technologies, for example to enhance its website/app to ensure a smooth online experience for its customers
• innovation may allow a business to use more technologically advanced methods for e-commerce, distribution/supply change, packaging and payment systems thereby allowing it to have an increased presence in global markets.

Answers could include:

• the way a business manages technology can impact the success of innovation. Management with a strategic outlook and relevant expertise may be able to engage with the innovation process better and ensure its success
• technological development may lead to disruptive innovation and, therefore, create a whole new market and disrupt the leaders in the existing markets
• technological discoveries or inventions may allow a business to do something they could not do before and give them the platform to change their business. The advancement of the internet allows businesses to sell their products online and digitise their distribution process.

Kotter’s eight-step change model places emphasis on involvement and acceptance of the change to ensure success. Corporate culture, as a driver of change, can impact on the success of transformation as it refers to the values or beliefs of a business. Forming a powerful coalition of key leaders will ensure that corporate culture is positive throughout the change. This is because corporate culture is driven by the leaders in a business, and it is the leaders that will ensure the change is implemented.

In 2019 Aldi supermarkets stated that by 2025 they would remove 25% of the plastic packaging that is used for its own products in Australia. By 2021 the business had taken significant steps towards achieving this challenging target; early in 2022 it was reported that over 2000 tonnes of plastic packaging had already been removed. This suggests that the changes being made by Aldi were being implemented very quickly.

High risk strategies are those that can be used by managers during a period of change which, if successful, will help the business to move quickly but if unsuccessful can lead to significant negative consequences. For example, some managers will resort to using threats or manipulation in order to ensure that business changes progress quickly. For Aldi, business owners may have been told to find ways to reduce plastic packaging or have their permission to open under the Aldi brand removed (a threat). Alternatively, branches may have seen certain products disappear from online ordering portals (manipulation) to artificially improve data for certain stores.

These strategies can be effective when a business is working to achieve a specific outcome with a short deadline. It is also true that high risk strategies are less likely to be questioned by employees due to a fear of the consequences that can occur. Aldi is working to achieve their goal by 2025; as they get closer to this deadline the senior managers might find that using high risk strategies becomes a more attractive option. On the other hand, when high risk strategies are queried by employees the managers might find it difficult to justify the way in which they are being used. This can lead to resistance from employees which can ultimately slow the process of change. If the senior managers at Aldi tried using these strategies too early in the change process it might make it more difficult for them to transition to reducing the overall amount of plastic waste that is produced.

As a result of the weaknesses associated with the use of high risk strategies, it is not true to say that ‘all managers’ will end up using this approach some of the time. It is possible that managers who use an autocratic or persuasive style might be more inclined to use these strategies, but some managers operate with a very different style. Despite the fast pace of the changes at Aldi during 2019-2022 senior managers who adopt a participative style might have achieved these outcomes through the use of low risk strategies. For example, open, two-way communication may have encouraged all managers to support the process of change. It may also have meant that the business was able to gather new ideas about the ways in which plastic waste could be reduced, helping to achieve the observed outcomes faster.

Overall, the statement can be considered inaccurate. It is true to say that some managers will choose to use high risk strategies during a period of business transformation, but successful change can also be achieved without resorting to this approach.

Management can use participation as a low-risk strategy when implementing change. Although challenging and time consuming for a manager to implement, participation is highly effective when implementing change. This is because existing stakeholders can directly contribute ideas and raise potential problems or fears experienced at various levels of an organisation. It also reduces resistance to change and minimises staff turnover, because it enhances organisational culture and increases the likelihood that the change will be successful, minimising resistance and implementation problems.

An example of using participation as a management strategy during transformation would be to include staff in decision-making throughout the process of change. Including a staff representative would provide staff with an ear and a voice throughout the process. Creating a regular column in the staff newsletter to inform of progress and seek feedback enables staff to participate in change by contributing their ideas, and expressing their concerns or fears, improving the likelihood of successful transformation. It also builds an environment that values and recognises employees’ contributions. This would reduce the level of staff turnover when implementing the change.

The final stage in Lewin’s change management model is refreeze. In this stage, the change is solidified and becomes a part of normal business operations. The ‘refreezing’ stage is crucial to ensuring the change is successful. The goal at this stage is to ensure that the people involved implement the change without resistance and that the change is normalised within the business.

A risk for a business if this stage is not implemented is that the previous behaviour could continue, and the change will not happen. For example, the business may need to modify the organisational structure to align with the change and to reinforce the new ways of working. If this is not done, it could jeopardise the change from being adopted.

Performance management reviews the overall performance of a business and its human resources requirements to ascertain how goals can be better reached. A possible outcome from the performance management review is redundancy. Redundancy is determined during a performance management review process where a position within an organisation may no longer be required as a result of business transformation.

Change management is a system of ideas that effectively supports the concept of change in an organisation. Two common change management theories are Kotter’s and Lewin’s.

Lewin’s change management is not as effective as Kotter’s because it is too simple and does not provide detail with each step of the model.

Kotter’s change management theory is more effective, presenting a practical eight-step approach to successfully understanding and leading change. It provides detailed steps on how to implement the model and action the change. Additionally, Kotter’s theory focuses on the importance of overcoming resistance to change and thereby eliminating the resistance to facilitate effective transformation.

All businesses have corporate culture in which all employees are a part of and contribute to. Corporate culture is the values, ideas, beliefs and expectations that employees hold within a business. There are two forms of corporate culture. Firstly there is official corporate culture. This is the culture that the business wishes to achieve, and it is set in policies and procedures and from the outer of a business, official corporate culture is all that can be seen. However, there is real corporate culture too. This is the corporate culture that actually occurs within a business, despite policies and procedures, and it can be observed in how employees interact with one another and how communication and social aspects are carried out.

A management strategy for developing a corporate culture that promotes the achievement of business objectives is recognition programs. This is where employees are recognised by the business by displaying exemplar work and behaviour. This would positively impact corporate culture as not only is it very motivational for the recognised employee, but for surrounding coworkers. The recognised employee will see a relationship between their hard work and a reward, and will feel inspired and motivated to continue working toward being rewarded and recognised. This also helps an employee to feel valued by the business, making them want to be as helpful and productive towards the business in achieving objectives. This recognition program is also motivational to coworkers as they will see that coworker being acknowledged and want that for themselves. A recognition program could be hosted as an event, which promotes social gathering and an overall ambience of positive corporate culture, hence, leading to a cascade effect on employees wanting to also achieve business objectives and be recognised.

Another management strategy for developing good corporate culture is a change of management style. Some management styles are too harsh, such as an autocratic approach, which allows for no employee contribution, and in some cases resentment. Having a management style, such as consultative, where there is an open communication channel, and employees are empowered to come up with ideas and better the business promotes positive corporate culture, and a collaborative approach in achieving business objectives, as there is a much larger pool of talent to draw upon in decision making. Hence this management style will promote positive corporate culture through collaboration and empowerment, that will promote the achievement of business objectives.

When transforming a business, it is important that staff engage in retraining by upskilling in line with strategic priorities, such as by acquiring new technological skills or developing new ways of working. Continuous learning programs will support employee development when transforming a business. One example is the career development of employees, which enables them to update their skills and knowledge along with a future focus for career planning.

Answers could include:

• the International Labour Organisation (ILO) is a United Nations' agency dealing with labour issues, particularly international labour standards and decent work for all workers
• in sweatshops, workers are paid little for their work, are forced to work unpaid overtime with no breaks, and are punished for any mistakes or for working slowly. Woodyz and Beards R Us must ensure that they pay their workers fair pay
• Woodyz and Beards R Us should adhere to fair wages, and occupational and health regulations for their workers in order to ensure long-term business success and to maintain a good public image
• the ILO understands that children may have to work and Woodyz and Beards R Us need to ensure strict standards and prevent the exploitation of children
• Woodyz and Beards R Us need to be aware of the ILO's Minimum Age Convention which states that 13 to 15-year-olds should only engage in light work around their schooling; 15 years is the minimum age for work; 18 years is the minimum age for any hazardous work.

Answers could include:

Venture capital:

• this involves investment in small to medium-sized businesses that have a strong growth potential, normally at the start of a business idea
• the amount borrowed can be paid back over a number of years.

Secured loans:

• this type of finance is obtained from a bank or other financial intermediary that can be for short-term or long-term
• interest charges can be fixed or variable on the loan. The amount borrowed is paid back over a nominated period of time.

Financial institutions:

• these include banks, finance companies, merchant banks, life insurance companies and general insurance companies
• financial institutions provide various short-term and long-term loan options for Woodyz and Beards R Us.

Government:

• can offer financial support to businesses or industries by providing government grants
• the one-off payment to businesses is beneficial as they do not need to be repaid.

Answers could include:

Discretionary spending:

• Woodyz and Beards R Us would need to do accurate and timely market research to determine discretionary spending habits and patterns of current and developing global markets
• Woodyz and Beards R Us would need to determine consumer confidence levels in the new market to see if consumers would purchase Woodyz and Beards R Us products if brought to this market
• Woodyz and Beards R Us would need to identify where its target markets are where consumers have sufficient disposable income to afford its products when these are brought to the market.

Interest rates:

• these may have an impact on spending patterns in global markets and may impact global expansion, especially when it comes to the development of infrastructure
• when businesses have access to finance with lower interest rates in other countries, they are able to more easily manage their repayments and reduce their costs
• Woodyz and Beards R Us can increase its level of investment but must be cautious if interest rates rise to enable it to manage its financial operations and global expansion.

Answers could include:

Merger:

Rationale: A merger occurs when two businesses combine to become one merged business with the view to gaining an operational or financial advantage.

Benefits:

• there is potential to still maintain some control of each of Woodyz and Beards R Us businesses while being more financially stable and with greater support
• there are increased financial benefits through better access to marketing which has the potential for increased profits
• there could be a potential to lower costs and increased profits, if both Woodyz and Beards R Us reduce their individual or combine their marketing and other operational costs
• Woodyz and Beards R Us could produce more products and in a greater variety, thus increasing their market share
• Woodyz and Beards R Us may enjoy greater efficiencies as they have access to shared facilities, resources and knowledge from both teams.

Joint venture:

Rationale: A joint venture would allow both businesses to develop a new project while still focusing on their individual core businesses.

Benefits:

• allows for the sharing of business' costs which allow Woodyz and Beards R Us to earn higher profits
• will enable Woodyz and Beards R Us access to a larger target market and customer bases which have already been established by each individual business
• this is an effective strategy because it does not change the existing businesses and can reduce the impact and demands on Woodyz and Beards R Us
• joint venture management can focus on the project instead of existing management taking on additional challenges or responsibilities
• once a project ends, the joint venture can be wound down and assets distributed according to joint venture ownership.

Answer(s) could include:

Financial gain:

• An increase in satisfied customers can lead to an increased market share, sales and repeat customers. Innovation can also lead to creating a delay in the decline stage of the product lifecycle resulting in greater profit for Matilda.
• Product innovation occurs if Matilda sources new and/or more products to sell. This may increase interest, sales and, in turn, profit.
• Process innovation occurs if Matilda is able to improve her processes through new technology. She could see productivity gains and better customer satisfaction, resulting in increased financial gain.

Expansion of global market presence:

• Innovation can be a driver of business growth. Therefore, Matilda expanding into the European market will enhance her global market presence.
• Innovation can give Matilda a competitive edge over her foreign competitors.
• Matilda's innovation can lead to her successful expansion into Europe and ensure that she is competitive in global markets through her business being new and different.

Increased market share:

• Innovation can assist with producing more appealing/innovative products and, therefore, increase market share for Matilda when she expands into the European market.
• Innovation can create a competitive advantage. A new product can create a consumer demand for the product, resulting in more products being sold and Matilda's business' market share increasing in the European market.

Answer(s) could include:

Timing:

• Timing can have an impact the success of innovation in terms of how it relates to customer purchasing cycles.
• Matilda has just read an ecommerce report in 2020 stating that European shoppers are spending more time shopping online. This means the timing is right for her to expand to Europe.
• It would be a good idea for Matilda to innovate her product, process and service while online marketplaces in Europe are attracting significant online traffic and high visitor engagement. This should lead to increased sales, thus success at this time is likely to be high and worth her investment in the innovation.

Cost:

• Investment in innovation, whether it is product, process or service, is costly.
• Money needs to be spent on research and development and can be significant. Therefore, it requires appropriate financial resources.
• Matilda has stated that she is willing to invest money into her business operations, so she has the best opportunity to be profitable.
• Matilda has seen a surge in online sales in 2020 and 2021. Therefore, she has income available to spend on innovation.
• If Matilda spends too much money on research and development, and innovation, and does not receive increased sales through the European market, she may be at risk of business failure.
• Matilda's financial investment in innovation may be important to her standing out from competitors in the European market, and be an important contributor to her success.

Answer(s) could include:

• Marketing through social media campaigns – researching and creating social networking sites used in Europe. This will be an easy and cost-effective way for Matilda to expand into the European Market.
• Adopting faster shipping technology. This will be positive for Matilda's business as it will improve customer satisfaction due to timely delivery of orders.
• Implementing safe payment methods – around the world customers are happy and confident utilising payment methods such as PayPal. This will assist Matilda expanding into the European market.
• Applying GPS delivery tracking systems – for both the business and the customer. This ensures the customer is updated via email or SMS, making them confident regarding the delivery of their order.
• Adopting e-commerce procedures. This will enable transfer of monies between currencies and countries instantly.
• Matilda can purchase relevant and reliable hardware and software for the business' needs. She can improve her website capabilities to change the language and/or apply different currencies. This will increase the business' reach to different countries where customers can make purchasing decisions using their own currency.

Answer(s) could include:

Availability of substitutes: Matilda needs to consider:
likelihood that customers will easily switch or use a competitor's product over hers.

• Are there similar products being sold online at a similar price or lower?
• Do the competitors pose a threat to her business' success?
• Are her products new, innovative and of high quality, compared to others on the market?
• Are there better-quality products available?
• Are there products of better value?
• Can she create buyer loyalty in Europe, or will consumers easily change brands?

Bargaining power of buyers: Matilda needs to consider the bargaining power of the buyers in Europe.

• What is the bargaining position of the buyers? Can the customers drive down the price?
• What is the level of quality and service demanded by buyers in Europe?
• What are the buyer numbers in Europe? Europe has a large population, therefore a large number of potential buyers.
• Which countries in Europe will have more buying power? Many parts of Europe have a large middle class, hence the disposable income to purchase Matilda's products.

Advice:
Due to the fact that Matilda is going to be investing in innovation of her product, process and service, the huge population of Europe and the fact that more European shoppers are spending significant time shopping online, there is no reason why she should not trial an entry into the European market. Her product is unique, luxurious and of high quality, thus should negate the issue of availability of substitutes.

The e-commerce report also affirms 'online marketplaces in Europe have attracted significant traffic and seen high visitor engagement that has translated into sales'. Due to the fact that more Europeans are spending time at home and shopping online, it is worth Matilda expanding her business into the European market.

Inputs refer to the resources used to make a business’ goods or services, such as raw materials, equipment or labour. Some inputs at Samaah’s Foodz include the ingredients used to make the savoury foods that are frozen, as well as the freezers used to freeze and store the product. Additionally, the employees employed to stack the frozen savoury food items are an input.

One low risk strategy Sammah’s Foodz could use is communication, which is the transferring of information (about the change to introduce new technology to broaden products and reduce waste) to employees. The communication of this change should openly and honestly outline the reasons and benefits for changing, including to achieve the new goals of broadening products and reducing waste, as well as communicating consequences of not changing. By allowing employees to clearly understand the reasons for change in order to remain competitive, they are more likely to accept the change and thus employee resistance can be overcome.

Sammah’s could minimise waste through the implementation firstly of ‘reduce’, which involves minimising unnecessary resources that do not add value to the final product. By identifying areas of their production process that do not add value, such as excess packaging around their frozen goods, they could begin only purchasing the minimum necessary packaging, thereby reducing that wastage that results when customers throw this material away.

Next, they could utilise ‘reuse’ to identify materials such as packaging that would otherwise be discarded, and use it again. For example, they could develop a system in which customers return the packaging from their products in return for discounts. Sammah’s could then reuse this packaging again and reduce its wastage.

Finally, they could utilise ‘recycle’ by using materials that would otherwise be discarded and transforming them into new products. For example, offcuts from the ingredients they use in their savoury foods could be repurposed into new meals, such as creating a new frozen soup range with the offcut ingredients, thereby recycling them and reducing waste.

One advantage of Porter’s differentiation strategy for Sammah’s Foodz is that it means that they will be able to charge premium prices for their frozen savoury items as their competition don’t have these items. Moreover, another advantage of Porter’s differentiation strategy for Sammah’s Foodz is that they will be able to attract a more loyal customer base whereby customers can only buy those products from them. Therefore, this can lead to an increased number of sales from their loyal customers.

However, one disadvantage of Porter’s differentiation strategy for Sammah’s Foodz as they seek to increase their sales is that it could be expensive to implement a range of products that their competition don’t have and so this could ultimately take away from their ability to focus on actually selling the items of a perceived value. Furthermore, another disadvantage of Porter’s differentiation strategy for Sammah’s Foodz is that it may not be hard for other competing businesses to also introduce the products Sammah’s stocks, which could therefore lead to decreased sales.

Answer(s) could include:

Acquisitions:

• This is where one business buys another to expand into new or greater markets. This is used as a growth strategy as it can create a bigger, more competitive and cost-efficient organisation.
• Two businesses together are more valuable than they are apart, combining skills, expertise, technology, capital and market share.

Mergers:

• Merging with a foreign business can help gain access to overseas markets.
• Asset sales may be carried out if there are double ups in equipment, buildings, vehicles and other assets.
• This should lead to overall cost reductions and increased profits.

Joint ventures:

• This allows both businesses to develop a new project while still focusing on their core business.
• Joint ventures allow for the sharing of business costs, target market and customer bases that are already established individually by each business.

Answer(s) could include:

• A business with an established brand name may already have a loyal customer base, reputation and presence within the market.
• Training, equipment and expertise is provided.
• Significant economies of scale and potential global advantages in large-scale advertising are possible

Answer(s) could include:

• It is cost effective and more efficient by using a specialist in the nominated field to be outsourced.
• A business can focus on its core competencies by outsourcing activities that are not core to the functions of the business.
• Costs could be reduced, such as labour costs
• Outsourcing might give a business access to technologies and developments in which it may not have the expertise in producing quality output.