Causes & Effects of Change (Edexcel A Level Business)

A change in business size

• Businesses are likely to grow organically as they sell more products
  • They may create or expand functional areas, open new premises or introduce new levels of supervision
     

• An increase in size may also come about when a firm merges or takes over another business
  • Workforces, resources and capital will need to be integrated and systems are likely to need to be streamlined
    
    

• A business may also become smaller as a result of divestment or as a result of market pressures
  • Redundancies and the sale of assets may be required or workers may need to transfer to other parts of the business

Poor performance

• A period of poor performance may mean that a business makes changes to its leadership team in order to pursue a new direction
  • E.g. after a run of 11 defeats in 14 games Frank Lampard was sacked as the manager of Everton Football Club in early 2023. The team went on to win its next game against league leaders Arsenal
    
    

• Change following poor performance needs to be swift to avoid problems setting in such as the potential loss of customers and reputational damage

New ownership

• A change in ownership can bring significant change to the overall aim and objectives of the business
  • A new owner is likely to bring new policies, attempt to make changes to a businesses culture and is likely to bring key personnel to implement these changes

Transformational leadership

• In some cases change can only be brought about by a transformational leader with a new strategic direction and vision for the business
  • Extensive changes are likely to be made to the businesses aims, objectives, structure and culture 

Business restructuring

• Changes to the structure of a business may be required as a result of expansion or contraction of the business
   

• Restructure may also be needed when a business enters a new market, changes its scope of operations or when it integrates with another business
  • E.g. as Frasers Group Plc has taken over a string of struggling high street brands such as Debenhams and Missguided, significant changes have been made to the managerial and operational structures of the business to reduce functional duplications and costs

Changes in the market

• A new competitor may enter the market or existing competitors may change their strategy
  • E.g. in the UK established supermarkets such as Tesco and Sainsbury have responded to new discount entrants Aldi and Lidl by focusing on low prices and the opening of smaller stores

Social change

• Long-term changes to consumption habits as a result of social change can require a business to refocus business strategy
  • E.g. as the UK has an increasingly diverse population food retailers now sell a wide range of world foods and related products

Political change

• Periodic change in political leadership can require both short-term and longer-term business response
  • E.g. the Conservative's government's 2015 election pledge to hold a referendum on the UK's membership of the EU has had a significant impact on business, especially for those involved in the import and export of goods to and from the EU

Economic Change

• Economic growth or contraction can impact on demand for goods and services and can be difficult to predict
  • E.g. poor UK growth in recent years combined with more recent high inflation has squeezed household's disposable income and led to significant change in consumers' purchasing priorities 

Technological Change

• Technological change has been particularly rapid over the last few decades, creating significant opportunities but, also, a need for businesses to adapt
  • E.g. the growth in online retailing has allowed even the smallest of businesses to reach a larger number of customers though traditional high street retailers have needed to adapt supply chains and invest significantly in logistics to be able to meet demand

Legal Change

• Changes to the laws affecting businesses often accompany political change and require adaptation and compliance
  • E.g. the 2007 law banning smoking in indoor public spaces meant that many hospitality businesses such as pubs and restaurants were required to make adaptations to their premises such as constructing all-weather outdoor facilities

Environmental Change

• Environmental change is increasingly associated with political change and subsequent changes to the law
• In recent years numerous environmental issues have emerged and, increasingly, consumers expect businesses to respond to their concerns, even if they are short-lived
  • E.g. in response to environmental concerns about the impact of single-use plastics the UK government introduced the 'bag tax' in 2015 leading to a 97% reduction in their use and the development of a wide range of innovative alternatives such as the corn starch bags provided by The Cooperative Group to shoppers