Buss4 Revision (2)

  • Created by: Libby
  • Created on: 12-06-13 15:25


Investing in new and better technology is always an option. However, that investment may not turn out to be a source of competitive advantage if competitors exploit it too. Rapid technological change challenges all competitors in a market. 

Technology and innovation

Developing new technology is usually expensive. The investment returns depend on the extent and pace at which the market adopts new products, or improved versions of existing products. 

There are two broad sets of issues to consider when looking at this:

Supply factors: things that concern the relevnece and availability of the technology to the market

Demand factors: things that influence how much market demand there will be.

How should businesses acquire technology?

In-house - often favoured if technology is a key competitive advantage, may have experience of achieving first-mover advantage, requires strong insights into technology and market needs, business must also be willing to take commercial and financial risks.

Alliances - not for competitive advantage, may want to 'follow and imitate' rather than innovate in the market, 

Aquisition - often important if speed is important, may be essential if technology is complex, high risk

1 of 26

The competitive environment

Every market or industry is different. They will be different in terms of size, structure, distibution channels, customer needs and wants, growth and product life cycle. 

The Five Forces Model is used to analyse the markets and industries.

Threat of substitute products


Bargaining power of suppliers - Intensity of rivalry within the industry - Bargaining power of | buyers

Threat of new entrants

Porter identified five factors that act together to determine the nature of competition within an industry. 

2 of 26

Managing Change - Acquisitions

Causes of change - Acquisitions

Ansoff's Matrix

Existing products New products

Existing markets Market penetration Product development

New Markets Market development Diversification

Ansoff's matrix suggests that a business' attempts to grow depend on whether it markets new or existing products in new or existing markets.

Horizontal integration = when a business takes over another company on the same level to increase market share

Vertical integration = when a business takes over another company either above or below it, to own more of the production chain - an airline taking over a airline manufacturing company. 

3 of 26

Managing change - retrenchment

Causes of Change - retrenchment

Retrenchment is when something is reducing - a business becoming smalller by reducing output and capacity, headcount reductions, product & market withdrawals, downsizing/rationalisation, disposals of business units, de-mergers and outsourcing.

Small scale retrenchment would not normally create the need for a significant change. However, a business unit closure, or the introduction of new top management to effect a business turnaround is a different issue.

Changed organisational structure - changed management responsibilities, potential effect on culture, greater workloads, higher stress, new teams etc.

New leadership/ownership - different leadership style, uncertainty, new priorities, aims and objectives, a threat to corporate culutre, old project abandoned.

4 of 26

Change process - culture

"The way we do things around here"

Culture consists of:

  • Shared values and beliefs or norms that affect work life
  • behaviours

The strength of a culture determines how difficult or easy it is to know how to behave within the business.

Culture can be demonstrated by: 

  • How employees are recruited,
  • the way that visitors and guests are looked after
  • How the working space is organiaed
  • the amount of delegation and responsibility
  • How long employees stay at the business
  • How contracts are negotiated
  • Communication
  • Structure
5 of 26

Change process - culture

Signs of a strong culture:

  • Staff understand and respond to culture
  • Little need for policies and procedures
  • consistent behaviour
  • Culture is embedded

Signs of a weak culture

  • Little alignment with business values 
  • Inconsistent behaviour
  • Need for extensive bureaucracy and procedures
6 of 26

Classifying business cultures

Power, Role, Task, Person.

Power culture

  • Control radiates from the centre,
  • Concentrates power among a few,
  • Few rules and little bureaucracy
  • Swift decisions are possible
  • frequently found in smaller organisations

Role culture

  • people have clearly delegated authorities within a higher defined structure
  • hierarchical bureaucracy
  • power derives from a persons position
  • little scope exsits for expert power
7 of 26

Classifying business culture

Task culture

  • Teams are formed to solve particular problems
  • Power derives from expertise as long as a team requires it
  • No single power source
  • Matrix organisation
  • Team may develop own objectives (could be a risk)

Person culture

  • People believe themselves to be superior to the business
  • business full of people with similar training, backgrounds and expertise
  • Common in firms of professionals - accountants, lawyers,
  • Power lies in each group of individuals

Power - autocratic

Role - autocratic or paternalistic

Task - paternalistic / democratic 

Person - democratic

8 of 26

Why is business culture important?

Business culture plays a key role in the ability of a business to achieve its objectives. The culture influences how almost every part of the business operates:

  • decision making and managing risk
  • how people are organised and supervised
  • motivation and job satisfaction
  • management and job satisfaction
  • recruitment and selection
  • How the business responds to its external environment
  • The growth options available to a business 
  • How customers are treated 
  • Attitude and actions to external stakeholders
  • Approaches to managing quality
  • The ability of a business to handle change 
9 of 26

Culture and business change

Culture is challenged by change, but a change in culture may be required to address:

  • improved business performance
  • declining profits and sales
  • inadequate returns on investment
  • low quality or standards of customer service

The need for cultural change is also linked to:

  • Market changes
  • political & legal environment
  • new business ownership
  • new management or leadership
  • economic conditions
10 of 26

Change process - implementation and management

Change may need to be a step change (sudden) or incremental change (change occurs over a period of time in incremental stages)

A step change is dramatic or radical change, radical alteration in a busines, gets it over with quickly, may require some coercion.

An incremental change is ongoing which takes place as part of an organisation's evolution and development, and tends to be more inclusive.

Change management

Lewins force field analysis 

Forces for change ---> <---- Forces resisiting change

Driving forces --------> <---- Restraining forces

Forces for change and forces against change create an equilibrium  - so to create change, the forces for change must exceed forces against. 

11 of 26

Resistance to change

Change can be disruptive and stressful.

Staff may not be happy due to habits, misunderstanding, low tolerance to change, fear of the unknown, parochial self interest and economic implications.

Also, the orgnisation may have structural inertia, existing power structures, resistance from work groups and failures of previous changes. 

The way to sort this is:

Explain the need for change, provide info, consult, negotiate, offer support, involve people in the process, build trust and sense of security, and build employee relations. 

12 of 26

Managing change more effectively

  • Identify the changes required - SWOT and PEST analysis
  • Determine major issues
  • Identify and assess the key stakeholders
  • Win the support of key individuals
  • Identify the obstacles
  • Determine the degree of risk and the cost of change
  • Understand why change will be resisted and how it can be managed

People are a key factor in overcoming resistance to change, so it's important to have good communication.

Top management need to:

  • Act decisively - momentum
  • consider how they will be affected
  • involve them in the change 
  • consult and inform frequently
  • consult and inform frequently
  • be firm but flexible
  • monitor change

13 of 26

Change process - Leadership

What is leadership?

  • Getting others to follow
  • The use of authority in decision-making
  • A personal characteristic
  • An ability to achieve effective performance in others

"A relationship through which one person influences the behaviour or actions of other people"

Leadership has become important in modern business as a result of: changing organisational structure (flatter structures require greater delegation, greater use of teamwork + focus on quality assurance, coaching, support and empowerment), and rapid environmental change (change as a constant feature of business life, and soft skills of leadership & management increasingly important)

Leaders should:

  • be clear about what change is required
  • turn ideas into actions and motivate others to act on them
  • creating a climate of learning, so people know its safe to make mistakes
  • keep going - persistance is vital
  • learn from experiences and mistakes
14 of 26

Leadership Styles


  • hold onto as much power and decision making as possible
  • focus of power is with the manager
  • communication top down and one way
  • formal systems of command and control
  • minimal consultation
  • use of rewards and penalties
  • very little delegation
  • McGregor Theory X approach 
  • Most likely used when employees aren't trusted


  • leader decides what is best for employees
  • links with Mayo - addressing employees needs
  • Parent/child relationship
  • still little delegation
  • a softer form of authoritarian, which oftern results in better employee motivation and lower turnover 
  • Typical paternalistic leader explains the specific reasons as to why he has taken certain actions
15 of 26

Leadership Styles


  • Focus of power is more with the group as a whole
  • leadership functions are shared within the group
  • Employees have greater involvement in decision making - may slow it down
  • Emphasis on delegation and consultation - but leader has final say
  • Perhaps the most popular leadership style because of the positive emotional connotations of acting democratically
  • A potential trade-off between speed of decision making and better motivation and morale?
  • Likely to be most effective when used with skilled, free thinking, experienced employees.

Laissez - faire

  • Laissez-faire means 'leave alone'
  • Leader has little input in day to day decision making
  • conscious decision to delegate power
  • managers/employees have freedom to do what they think is best
  • often criticised for resulting in poor role definition for managers
  • effective when staff are ready and willing to take on responsibility, they are motivated, and can be trusted to do their jobs
16 of 26

Models of leadership

McGregors Theory X and Theory Y

Theory X Managers

  • average worker is lazy and dislikes work 
  • Workers need to be controlled and directed
  • centralised organisation and exercise of authority

Theory Y Managers

  • Most people enjoy work 
  • workers will take responsibility and organised themselves
  • decision making can be delegated

Leadership style depends on:

  • Personal value systems
  • type of organisation - size, structure
  • managers experience
  • teams and groups
  • security
17 of 26

Planning for change - managing risk

Risk management: the identification and acceptance or offsetting of the risks threatening a business.

Contingency planning: A plan for unseen events, including back up procedures, emergency response and post-event recovery

Crisis management: the process of responding to and minimising the damage from an adverse event.

Risk Management

  • identifying what and how things can and might go wrong
  • understanding the potential effects if things go wrong
  • devising plans to cope with the threats
  • putting in place strategies to deal with the risks either before or after their occurrence

E.g. Marketing - avoid over reliance on customers or products, develop multiple distribution networks, test marketing for new products

Operations - hold spare capacity, and quality assurance and control

Finance - credit insurance to protect against bad debts, investment appraisal techniques

People - key man insurance (protects against loss of key staff) rigorous recruitment and selection procedures.

18 of 26

Planning for change - managing risk

Contingency planning

  • preparing for predictable and quantifiable crisis
  • preparing for unexpected and unwelcome events

The aim of contingency planning is to minimise the import of foreseeable events and to plan for how the business will resume normal operations after the event.

The key stages are:

  • recognise the need for contingency planning
  • identify possible problems
  • specify the likely consequences
  • assess of the degree of risk to each eventuality
  • Determine risk strategy 
  • prepare plan
  • test the plan

Crisis management responds to sudden events, limits damage, emphasises the need for flexible response to any situation and selects a crisis team, whereas contingency planning prepares for predictable events, and over longer periods of time. 

19 of 26

Planning for change - SWOT analysis

Strengths Internal

  • Things that the business is good at
  • giving a business an important capability
  • sources of clear advantage over rivals
  • help achieve its objectives


  • a disadvantage
  • the business lacks or does poorly
  • place the business at a disadvantage
  • may hinder the business achieving objectives

Opportunities External

  • an opportunity is any feature of the external environment which creates positive potential for the business.


  • threats are any external development that may hinder or prevent business achieving objectives
20 of 26

Business Case Studies


  • Cult like culture
  • Revenue increased 8% in 2012 to £2.7bn
  • 139,000 'co-workers' (employees)
  • "we always recruit based on our values"


  • Total income up 2% in 2012 to £29bn
  • £44bn lending to incomes in the UK
  • profit before tax £7,048m
  • New CEO Antony Jenkins trying to change culture, been with Barclays since August 2012
  • Trying to change culture due to Libor scandal - Barclays has said it will cut 3,700 jobs as it aims to cut costs by £1.7bn
  • "Our goal is to make barclays the 'Go-To' bank for all our stakeholders"
  • Their values: Respect; integrity, service, excellence, stewardship.

21 of 26

Business Case Studies


  • Net sales $39m in 2012
  • Profit before tax $3486m 2012
  • Didn't keep up with changing technology as they thought they would still stay as market leader

Southwest Airlines

  • Net income $421m 2012
  • operating expenses $16m
  • operating revenues $17m


  • Morrisons buys 6 HMV stores as it fails.
  • Competitive advantage
22 of 26

Business Case Studies

Thomas Cook

  • Harriet Green joined in July 2012
  • Improving technology and emerging markets
  • Appointed externally 


  • Thorsten Hiens joined in January 2012
  • Re-branding - officially changing its name to Blackberry 
  • Appointed internally


  • Marisa Mayer 
  • Appointed externally - from Google


  • Tim Cook named CEO after Steve Jobs died
  • Running out of ideas - Jobs left ideas for two years
  • Moved production to China - lower production costs - globalisation
23 of 26

Business Case Studies


  • Phillip Clark 
  • 'Fresh 'n' Easy' Pulled out of America - couldn't compete with Walmart
  • Horse burgers
  • "Sales fall in nine out of 11 countries - including UK" - suspected because of horse meat scandal


  • Benefited from economic turn down 
  • CSR - Bangladeshi factory collapse 
  • Have to rebuild reputation
  • fire in Bangladesh - now launched a programme supporting CSR and values and ethical standards.

John Lewis

  • "The partnerships reputation is founded on the uniqueness of our ownership structure and our commercial success. Our purpose is 'the happiness of all our members, through their worthwhile, satisfying employment in a successful business."
24 of 26

Business Case Studies

Coca Cola

  • Changed mission statement - "To get more people to drink coke than water"
  • "conducts business in ways that protect, preserve and enhance the environment."


  • Closed due to downturn
  • Dixon's benefited from already trained staff

News of the World

  • Toxic sub culture - phone hacking scandel caused it to close

Honda and Nissan

  • Had all production in Japan, Tsunami wiped out buildings etc so loss of parts all over the world - put a stop to production of Nissan and Honda vehicles
25 of 26

Business Case Studies


  • Merger with Kraft
  • UK centric business
  • History of paternalistic leadership
  • Traditional heritage


  • Merged with Cadbury
  • US centric business
  • Perhaps more agressive management style
  • Built around aquisitions
26 of 26


No comments have yet been made

Similar Business Studies resources:

See all Business Studies resources »