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3.6.1: Causes of Change - Coggle Diagram
3.6.1: Causes of Change
Change in organisational size
Can negatively or positively affect production
Leads to reduced production time and ability to achieve economies of scale. This can be passed on to consumers and can make the business more competitive.
Could lead to dis economies of scale where productivity can decrease: this can occur if there is not enough resources or machinery for workers, leading to increased production time and lower competitiveness.
Increase communication time
Business decisions may noy be enacted as quickly, which can reduce productivity.
Delayering may be needed as the business grows.
Can influence shareholders
If the business is growing and increasing profits, shareholders will keep their investment and they will receive larger dividends.
However, they may retract their investment if the business size is decreasing, as they will lose confidence in the business.
Cash flow
Increase in organisational size may lead to the business overtrading.
Cash flow needs to be managed to make sure the business has enough working capital.
Poor business performance
Causes
Sales or profits are lower than expected
Operating expenses are rising faster than revenue
The business is growing slower than expected.
Implications
Competitiveness
Lower sales = increase in prices, could lead to lower sales and a decrease in cash flow and profits.
Productivity and efficiency
Reduces output, meaning the business is paying workers for less output, decreasing efficiency.
Stakeholders
Staff may be made redundant, reducing staff morale.
New ownership
Why this might occur:
Private limited company > PLC
Change from sole trader to partnership
Business sold to new owners
Takeover or merger
Affects stake holders
Customers may see a change in customer service quality
Managers might see a change in responsibilities or business aims
Shareholders
May resist the change if they are negatively affected.
Business may have to communicate the changes to shareholders.
Culture clash
Transformational leadership
What is this?
The market and external factors