VCAA Business Management Reviewing performance – the need for change

An external operating environmental factor that could influence a business manager to initiate change is the business’s customers. A business must continually ensure that its customers’ needs are being met. It also needs to respond quickly, changing the way it operates to satisfy its customers. For example, a business that only provides instore facilities may need to change its operations and provide an online option to meet customer needs and stay competitive.

A reactive approach to change is one where a business responds to change only after being impacted by the external or internal business shifts. For example, following the pandemic and the decrease in sales in 2021, Dominoes decided to launch a new cost savers pizza xxx to appeal to price sensitive customers and ceasing [?] their expansion into Denmark. This is a reactive approach to change as Dominoes only introduced the scheme after suffering from profit and sales losses due to the lasting economic effects of the pandemic leading to less customers willing to purchase pizzas. A reactive change is unplanned and means the business has to react in a short amount of time, which can negatively impact their competitive edge, such as Dominoes being unable to expand to Denmark in order to save costs from losses of sales.

Proactive change is where a business initiates change and aims to implement it before being impacted by shifts in the internal or external environment. For example, following a $1 billion investment into Open AI, as of 2021, Microsoft invested a further$10 billion into the technology in order to implement its features into Microsoft applications and tools. This type of change is carefully planned and provides the business with more time to prepare and create a competitive advantage as any changes to not negatively impact them or greatly disrupt their operations because they initiated it.

Answers could include:

• staff downsizing for cost reductions in global operations
• transition from physical stores to online stores worldwide
• introduction of new products in global markets
• establishing strategic alliances with overseas businesses
• adaption of staff attitudes and work habits in changing global environments
• extent of a business's financial resources
• international expansion of domestic businesses.

Answers could include:

• Forcefield Analysis is a tool that can be used in change management to help employees understand the need for a change
• the model can be used to organise thinking where a brainstorming template is used to record the forces that support change and the forces that create any resistance to the change
• once the forces are identified, they are then given a rating, which could be out of 5 or 10, according to their importance. The lower the rating, the least impact a force has on the proposed change, the higher the rating, the greater the impact
• the change would look viable if the forces for change score higher than the forces which may create resistance to the change
• management may have to attempt to find ways to reduce the forces which resist change if these forces are rated more highly; similarly, they may have to develop plans to exploit the forces for change if these rate more highly.

A similarity between Porter’s cost leadership strategy and his product differentiation strategy is that they both seek to help companies achieve their business objectives, particularly profit and increased market share. As a cost leader or through a differentiated product, more sales will occur, leading to the satisfaction of stated business objectives. Another similarity between the two strategies is that they both intend to deliver a competitive advantage for businesses who use each strategy. This allows businesses in their area to outperform rivals. A difference between lower cost strategy and product differentiation is that large companies are more likely to implement the former. This is a result of cost leadership requiring economies of scale to be achieved in order to reduce the cost of production. On the other hand, product differentiation is available to firms of all sizes, not just large companies with great amounts of capital to invest. Another difference is that product differentiation aims to create brand loyalty, where cost leadership does not. Through the development of a brand/identity, differentiated products seek a target or regular customer base of loyal supporters. In Porter’s cost leadership strategy, this does not occur with customers opting for the cheapest option regardless of the products’ brand.

Many businesses had to go through reactive change due to the global pandemic of Covid-19. Particularly supermarket businesses responsible for supplying the society with essential products for survival. As an effective leader, Brad Banducci, CEO of Woolworths, has led his business in an efficient way to respond to the change. Driving forces are those that support and encourage change and thus, aids in accomplishing business objectives and ensures the success of the change. Societal attitudes are a major driving force. These relate to the changing attitudes and beliefs of the wider community. Covid-19 sent many customers/society into a panic state of purchasing an excessive amount of essentials for the survival of lockdown. This led to Brad’s response to change the way Woolworths run, in order to accurately respond to the changed societal attitudes towards purchasing essentials. Brad needed to quickly respond to this by introducing a limit as how much items an individual could purchase (as he needed to ensure there is always enough stock considering the panic buying). Not only this, but also open up Woolworths stores an hour early, dedicated to only the elderly as societal attitudes also changed towards them as they were considered most vulnerable and thus, had more priorities to gain essential items over those of a younger age. Therefore, Brad used societal attitudes as a way that drove his business to change, in which he handled adequately and had been successful and efficient during the pandemic.

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.

Answer(s) could include:

Internal factors that drive change:

• management’s desire to introduce change, e.g. costs can be a factor in driving change; if the cost of production is too expensive, outsourcing may be an option to save labour costs
• employees might initiate change to improve working conditions and/or skill development
• introduction of new technology for efficiency and/or cost savings
• staff attitude and work habits may drive change in a global environment.

External factors that drive change:

Political and legal:

• political decisions can have a huge impact on a business by changing laws or regulatory regimes
• changing legislation and the legal requirements of individual countries can drive change in a global business environment

Economic:

• interest rates
• inflation
• unemployment
• economic indicators

Social:

• evolving social norms can drive change as people change expectations and consumption behaviours
• international events and issues may drive change in a global business environment
• use of technology by consumers also drives change as it forces businesses to reconsider their own use of technology and interaction with outside parties
• prevailing social issues might impact on public image or relations

Technological:

• technology is rapidly changing and impacts on the way businesses are able to interact with stakeholders. This could drive change in the way a business distributes products, engages in e-commerce or uses social media to connect with customers

Environmental:

• changing attitudes to climate and environmental impacts might drive change in a global environment; businesses may need to consider their own environmental impact and how that might affect their ability to penetrate new markets.

Answer(s) could include:

Lewin’s Forcefield Analysis model is used by businesses to ascertain how viable a decision or change might be. It takes into account forces that drive change and restrain change, determining whether the change is the preferred option.

Lewin’s Forcefield Analysis model can be implemented through a series of steps:

1. describe the plan or proposal for change
2. identify the forces for change
3. identify forces against change
4. assign scores
5. analyse and apply the change.

The forces driving and restraining change must be appropriate to the type of business and the proposed change: driving change – long-term revenue, market demand, unsustainable costs, competition, customer expectations; restraining change – company culture, time restraints, conversion cost, staff attitude.

A business can use Lewin’s Forcefield Analysis model to prepare people for change by sharing with their stakeholders how the change would impact on them, and the factors that had been taken into account in preparing for the change.

The evaluation of forces should be clear and appropriate; it must be determined whether the proposed change is feasible.

By using Lewin’s Forcefield Analysis model, businesses can be transparent and clear in communicating the impending change and, therefore, properly prepare its people.

Changes in legislation may change business operations. For example, workplace safety laws may change. This would require businesses' current operating policies or processes to be rewritten, or physical changes to the premises to ensure compliance, e.g. PPE or fire safety.

Businesses must also adhere to governing body industry regulations or standards. A business may need to transform human resources to reflect changed professional qualification requirements to be licensed in an industry, e.g. real estate agents.

A macro external environmental factor that influenced change at the vet clinic is the legal environment. The legal environment relates to the laws that state how a business must operate. Stimulus 11 refers to the lobbying influence of welfare groups and veterinary associations in achieving legislative change, which resulted in updates to legislation. These updates mandate that vet nurses must have necessary training to perform complementary therapies. Therefore, the business needs to change to abide by the new laws.

Answers could include:

Financial growth opportunities and/or loss minimisation:

• identifying and capitalising on new markets can lead to increased business revenue and a larger customer base
• a strong presence in multiple markets can enhance a business' financial stability and growth potential
• diversifying operations across different regions can mitigate risks associated with economic uncertainty and political instability
• an Australian business may go to a low-cost country to manufacture their products to increase their profit margin.

Consumer purchasing and spending patterns:

• consumers leverage technology and social networks to access and compare products globally
• businesses utilise technology to connect with consumers through social media and can enhance brand loyalty
• global transportation, digital product distribution and secure online payment systems create a robust platform for global business growth
• increasing consumer spending patterns or higher numbers of consumers drive businesses to expand globally, while decreasing patterns or lower numbers may slow expansion.

World Trade Organisation (WTO) regulation and sanctions:

• the WTO establishes standards for international trade and governs free trade agreements
• the WTO combats the exploitation of developing nations by multinational corporations, particularly concerning environmental and labour issues
• WTO rules require the elimination of tariffs and other trade restrictions between member countries and ensure non-discrimination against service suppliers
• the WTO sets standards for global businesses, including transparency, commitment and trade facilitation, aiming to maintain safe global trade with clear rules and dispute resolution mechanisms.

Deregulation of the financial market:

• governments worldwide have reduced barriers to the flow of money between nations through financial market deregulation
• deregulation allows Australian businesses to access market outside of Australia, which can help businesses expand their customer base
• deregulation enables businesses to be cost-effective in their global expansion, grow their international market share and facilitate the transfer of capital overseas
• Australian businesses can minimise or hedge against financial losses and increase profit if they expand into overseas markets.

Answers could include:

Changes in a domestic market:

• globalisation can result in competition to the domestic market from foreign businesses. This could encourage domestic businesses to improve their performance by becoming more efficient or innovative to combat the competition. However, to accomplish this, their costs might increase, affecting the demand for their goods/services and/or their profitability
• if saturation occurs for the products of a home country business, it could explore export opportunities in overseas markets. As well as adding another revenue stream, this reduces the business' dependency on the local market
• domestic businesses might need to reduce their prices to remain competitive with foreign businesses, resulting in reduced profits
• globalisation provides an opportunity for domestic businesses to access overseas suppliers. This could result in lower manufacturing costs, or the potential to manufacture new products to sell to customers.

International cooperation:

• Free Trade Agreements (FTAs) and strategic alliances encourage businesses to collaborate on trade and investment opportunities due to the strong ties between countries which is fostered by globalisation. This interconnectedness can lead to a more stable global market
• international cooperation in the sharing of technology and knowledge can result in research and development projects that lead to advancements in various fields globally, such as environmental sustainability
• through international cooperation, businesses can develop and implement effective solutions to challenges which benefit the global market, such as supply chain disruptions, environmental sustainability and cybersecurity threats
• globalisation encourages cultural exchange and understanding among businesses, fostering mutual respect and reducing international conflicts. Through increased interaction and communication, businesses can build stronger partnerships and work towards common goals in areas such as corporate social responsibility and ethical practices.

A management style is the way managers organise tasks and interact with employees to achieve business objectives.
A manager with an autocratic style may impose change on the business based on their judgments and opinions only. This style ensures the decision to change is made quickly, and the change commences without the involvement of staff.
A manager with a democratic style will drive change that responds to the wishes and judgments of their staff. The open communication associated with this style will ensure the need for change is clear and all are involved.

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.

Answers could include:

Political and legal external factors:

• changing legislation and the legal requirements of individual countries can drive change in a global business environment
• 'international border restrictions, regulations and legislation have decreased' hence more people are travelling, increasing rooms booked and memberships to their loyalty program.

Social external factors:

• evolving social norms can drive change as people's expectations and consumption behaviours change
• 'people have the confidence to travel internationally once again'
• international events may drive change in a global business environment
• 'popular events are back on, such as the Australian Open and the Formula 1 Grand Prix'.

Answers could include:

Managerial inertia:

• occurs due to managers' reluctance to the change due to factors, such as unfamiliarity, lack of understanding and motivation, poor communication of the vision, dislike of disruptions or uncertainty, lack of security, costs or the process of change itself and a preference to continue with the status quo.

Reasons for resistance to change:

• 'Wendy would like to move their head office in the Asia Pacific area to focus on increasing membership and customer service within that region', but staff 'are also unhappy with the change of head office to Singapore'.
• 'Everyone within each team can apply if interested, no matter the time at the organisation and/or experience', hence, 'some more experienced employees within the company have expressed disappointment and frustration that junior members of staff can apply for this promotional position creating resistance to change and arguments within the teams.

Answers could include:

• managing diversity can be a strategy for business growth as it enables a business to have employees who possess a wide range of talents, skills, experience and ideas, leading to business growth. The diversity amongst the staff will enable the potential for higher levels of creativity and innovation, hence being a strategy for business growth. Diversity leads to better understanding of client needs which then leads to increased client loyalty, sales and profit
• diversity includes employing people from a range of genders, ages, ethnicity, cultural and religious backgrounds and also includes employing people who may have differences in educational levels, skills, socioeconomic backgrounds, personality, geographic locations and family situations
• when Wendy is selecting her new Training and Development Coordinators, she needs to ensure that she chooses a diverse range of people who have a wide range of experience, skills, gender, ethnicity, age and backgrounds. This will ensure a dynamic team is selected that will bring a variety of ideas, creativity, and innovation to create further growth within the business.

Answers could include:

Step 6: Create short-term wins

• Wendy needs to create short-term targets where success can be achieved. This could be based around her loyalty program membership goals, employing the new roles and the first success training trips to Singapore
• Wendy could achieve this by choosing early targets carefully, as failure to achieve these targets will hinder any future success and commitment of her team.

Step 7: Build on the change

• to achieve long-term change, Wendy needs to build on what has gone well and identify where they can improve
• Wendy needs to achieve this by ensuring that any changes are regularly reviewed and improved upon; ensuring all policies are updated; seeking feedback from her staff and identifying where new changes are not being followed.

Step 8: Anchor the changes in corporate culture

• to make any change stick, it needs to become part of the core of Wanders Hotels values and goals. Wendy needs to make continuous efforts to ensure that the change is seen in every aspect of the business
• Wendy needs to implement this step by celebrating her team's success regularly; emphasising that success has come from the change; and ensuring that her Training and Development team are widely informed of the changes and can take help their team confidently with queries.

Advice for Wendy:
Kotter's 8 Steps change management model is an 8-step model that provides guidelines for the successful implementation of change. The model will allow for Wendy to have a clear idea about how to manage change and to effectively communicate the change to her employees. Kotter argues that involvement of staff instils commitment to the change. The model can be used to reduce resistance to change that Wendy is experiencing with her decision to allow everyone to apply for the new Training and Development Coordinator roles and creating a new head office in Singapore. By Wendy applying each of the 8 steps to her changes within the business she will reduce the amount of resistance, create a vision for her employees and steps towards successful implementation of change.