Teaching guide: Managing strategic change (A-level only) (podcast)

These podcast teaching guides cover topics from our AS and A-level Business specifications. You can download them below.

Podcast 9: Managing strategic change (A-level only)

This podcast covers the specifications' tenth subject area and corresponds to section 3.10 of the specification, ‘Managing Strategic Change. It includes: Managing Change; Organisational Culture; Implementation strategy; and Strategic Failure.

Transcript

Hello and welcome to the AQA A-level Business podcast, supporting your teaching of our specification.

Today, you are listening to the ninth podcast in our series. In this podcast, we’ll continue to look at subject areas specific to the second year of teaching of our A-level Business qualification.

In the first six podcasts belonging to this series, we covered the first six subject areas of our AS and A-level Business specifications. We considered the objectives of different businesses and analysed decision making in the different functional areas. The content of these subject areas was built around a decision making model, where we: considered functional objectives, analysed the existing situation and weighed up alternative actions that might be taken in order to make a decision.

This decision making model continues into the remaining subject areas of the specification but the emphasis is now on strategic decisions. We’re now thinking about how the business as a whole might want to move forward.

In podcast 7, we looked at subject area 7 of the syllabus. We considered the importance of the internal and external environments in terms of deciding what strategy to pursue. This included PEST analysis, Porter’s five forces, SWOT analysis, Elkington’s Triple Bottom Line and Norton and Kaplan’s Balanced Scorecard.

In podcast 8, we looked at subject areas 8 and 9 of the specification. We took a look at the Strategic direction a business could take, looked at factors involved in this decision making process and the various strategic methods a business could utilize when making a strategic choice.

Making a strategic choice involves change. We will now turn to talk about the aspects of Managing change, covered in subject area 10 of the specification. In the first section, we’ll focus on Managing Change, in the second section we’ll cover Organisational Culture, in the third section of this podcast we will take a look at Implementation strategy, and in the final section we’ll discuss Strategic Failure.

Part 1: Managing change

Change, will be happening all the time. It can be internal, such as changes in the values and aspirations of employees; some of it will be external, such as economic and social changes. Some will be incremental; some will be disruptive. Some changes are possible to predict; whilst others are not. Managers need to be able to anticipate and respond to change. They may also want to bring about and create it, in order to move the business forward.

At any moment there will be forces for and against change and these are described in Lewin’s force field model. Here we see that Change may occur if the forces for change (for example, the pressure to be more competitive or the levels of customer dissatisfaction grow in scale and intensity). We can also see if the forces against change can be reduced (for example managers overcoming employee resistance or more funds becoming available to finance change). Change can be unwelcome. It can lead to difficulties such as job losses and closures. However, it can create opportunities - it can create promotion possibilities, it can create new challenges, new projects and growth. When Analysing change we’ll need to consider what change it is, how unexpected and dramatic it is and from whose perspective it is being considered.

To be ready for, and make the most of change, an organisation may want to be flexible. so they are able to increase and decrease in size relatively easily - It may choose to achieve this by using subcontracting, outsourcing and temporary staff. A business may have an organic structure that encourages team-work, project work, sharing and collaboration.

But may choose to restructure so that decisions are made by the right people at the right time. It may also want to develop effective processes to gather and disseminate information as well as to capture and use the knowledge of those inside and outside of the business. Better information and effective knowledge management leads to better decision-making and less mistakes. However, this does not mean that just collecting more data is the answer. Managers have to consider what you want to know, what format this information needs to be in, when the information is needed and by whom.

Change will benefit some people but it will also affect others negatively. This means most change is likely to face some resistance. Some stakeholders will probably not want it to happen. According to Kotter and Schlesinger the reasons for resistance can be categorised as self-interest, a lack of understanding, a contradictory view of what is best or a preference to keep things as they are. Managers need to identify what the underlying reasons for the resistance are if they want to overcome them.

There are many possible ways of overcoming or reducing resistance. Such as training, explaining, bargaining or forcing change through. The best method will depend on what it is causing the opposition, how strongly felt it is, how quickly change needs to occur and how much it matters whether people believe in the change or whether it is acceptable if they simply change their behaviour.

We’ll need to consider the context and to consider different scenarios- in some situations managers may feel there is no other solution than to force change through whereas in other situations there may be more room for discussion and negotiation.

Part 2 - Organisational Culture

To understand an organisation we need to understand its culture i.e. the values, attitudes and beliefs of its employees. The culture of an organisation will influence how employees respond in any situation, what they prioritise, what they care about and how they act.

There are many different forms of culture and many studies have been done regarding cultures within organisations and indeed in countries. These include Handy’s work on power, role, task and people cultures. Power cultures often suit small start up businesses that are heavily dependent on the founder. Role cultures often emerge as organisations get bigger and need greater formality and structure. Task culture suits organisations where project work is common such as software development businesses. A person culture tends to work well where there are professionals operating in their own areas such as doctors or lawyers in a practice. This highlights that there is no “right” culture; it depends on factors such as the nature of the work, the stage of development of the business and the skills and attitudes of employees.

The work of Hofstede highlights national differences such as the difference in importance of hierarchy, the extent to which we plan long term or the importance of the individual compared to the team player. Although Hofstede’s work centred on national differences it highlights some of the dimensions on which individuals as well as different organisations cultures can vary. The differences that exist show the benefits and potential gains of organisations coming together in terms of diversity and new perspectives but also that cultural differences can bring problems, for example with takeovers or with different departments or regions working together. Differences in national culture also highlight some of the potential problems doing business abroad.

The importance of culture can be seen in the number of times it is referred to when analysts are considering business success or failure. Think of the culture of the banking system and how it led to excessive risk taking. With this in mind, we can appreciate why managers often want to change the culture of a failing organisation – in order to drive a strategic decision, be it to make the organisation more innovative, more customer focused,

more quality focused or more cost conscious.

There are far more varieties of culture than Handy’s and Hofstede’s frameworks show and it is important to recognise that variety exists. Plenty of examples in the news highlight how different cultures affect business performance. The right culture will depend on the particular challenges facing the organisation. To change culture can be a long process as it involves changing employees’ underlying values and beliefs. It may involve leading by example, employee training rewarding the right behaviours or punishing the wrong ones

so employees understand the need and value of cultural change.

We hope this section has helped you to think about why cultures matter, how to change culture and the potential difficulties changing culture.

Part 3 - Implementing strategy

Once a strategy is selected it has to be put into practice. The implementation may be as hard or harder than the selection. For example, we may know we need to work hard before exams but making sure we set aside enough time and use this productively can be a different issue. Strategy Implementation requires managers to ensure they have the

right resources at the right time and in the right place and this depends on effective leadership and good organisational skills. Effective implementation faces many challenges- just look at how many projects overrun on time or in terms of costs. When considering these factors, we can see how Strategic decisions are often complex. They therefore throw up unexpected issues and challenges, which can make implementation difficult.

Implementation requires the right organisational structure so that people have the ability to make the decisions they need to and have the skills and resources available at the right time. If an organisation wants to respond to very different regional requirements, for example, managers may want a regionally organised structure. If they want to operate very differently in their healthcare markets compared to their cleaning markets they might want a product structure.

When implementing a strategy, managers will want to organise the necessary resources and make sure these are in the right place when needed. To help with this planning a business may use network analysis. Network analysis allows managers to organise a project to find out the fastest way of completing it. It also enables them to identify which are the critical activities which cannot be delayed without the whole project overrunning.

Remember that the purpose of network analysis is not just to plan what to do and when but also to analyse the effect of any changes in the progress of a project. If an activity overruns, network analysis can be used to track the effect on the overall completion time. Students need to be able to complete and amend a network diagram, identify a critical path and calculate total float. This can help identify the likely completion time for a project and analyse the implications if there are any delays on any of the activities. Students should not criticise network analysis simply on the basis that estimates can be wrong as this is precisely why this type of planning is valuable. We should also remember that in some cases the duration of an activity depends on how many resources are allocated to it and the standards of quality that have been set. If managers wanted to speed up an activity it may be possible to do so by investing more resources into an activity and/or reducing the standards that have to be achieved.

Part 4 - Strategic failure

However well planned a strategy is, it is not necessarily going to be successful and. there are many possible reasons for this. It could be the wrong strategy is chosen due to poor planning (perhaps the data collected was incomplete or inaccurate). The strategy may have been right at the time but inappropriate by the time it is undertaken as external conditions have suddenly changed. It may be implemented badly or competitor reaction may be different from that expected.

It could also be the case that the planned strategy of the business and the strategy that actually emerges turn out to be different things. Why? Because over time decisions may be made to respond to changes in the environment that actually moves the business away from its initial course and it ends up heading in a different direction. The strategy that emerges is different from the one that was planned.

The strategy of a business may also move away from where it should be because whilst the business environment changes the strategy does not change with it; this is known as strategic drift. Students should consider why strategic drift might occur, what the possible consequences are and whether a business can avoid it happening. For example, are there ways of avoiding being too inward looking, of gaining better insight into market conditions and of being more responsive to change?

Strategic planning can, therefore, go wrong. However this does not mean that strategic planning is unnecessary or without value but its value will depend on how well it is undertaken, how well the strategy is implemented and whether it is continually reviewed.

We all know of businesses that seem to have lost their way strategically (think of Woolworths, JJB Sports, HMV and Habitat). However, the strategy of others at the moment, and it is only at the moment as it may change, seems to be good – such as Aldi and EasyJet.

As well as their strategic plans organisations will sometimes plan for the unexpected. This is called contingency planning - what would we do if our chief executive suddenly left? How should we react if a competitor makes a takeover bid for us? What if there is another global economic recession? Whereas you cannot plan for every possible situation it is important to assess the risk.

To end this podcast we’ll quickly recap some of the key points relating to the subjects taught in the second year of the specification.

Subject areas 7 to 10 focus on strategic planning. As we have discussed, this involves assessing the strategic position of a business, considering its strategic options, making strategic choices and implementing and managing the process of change and implementation. This should build on the work covered in subject areas 1 to 6 and link easily to what is happening in the real world. Students should be able to analyse case studies of business behaviour using the knowledge and tools in the specification which should help bring the subject to life.

As ever context is important in business- the “right culture, the “right” structure and the “right” strategy all depend on the situation. By studying different situations students will develop their critical skills and the ability to prioritise and make informed judgements.

Subject areas 7 to 10 provide an opportunity for students to apply their study of Business to the world around them. Using everything they have learned analyse key business issues and be in a position to make well informed judgements. We hope they enjoy the study of the subject and gain an excellent understanding of and insight into the business world as a result.

Thank you for listening we hope you have found this podcast useful. For more helpful AQA resources, visit the AS and A-level Business pages of our website, aqa.org.uk/business