Business Environment in Time of Globalization

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Introduction

The twenty first century has come with various challenges to organization. Business environment today is characterized by frequent changes than poses challenged to managers. In the tradition organizations, change was moderate and predictable. For these organization, long-term strategic plan were effective. The strategic plans could anticipate long-term changes and plan on how to handle the changes. Globalization, technological advancement and other changes make business environment in 21st century highly unpredictable and challenging.

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The 21st century is characterized by highly unpredictable business conditions. Frequent technological, market place, competition, economic social and political changes make doing business today and in the future challenging. The frequent changes obscure the ability of management to predict and plan for the future. To be successful in the new business environment, organizations must be able to take the necessary first steps and then build on the steps for future actions. Business environments are changing chaotically to support fixed plans, firm objectives or fixed programs of change.

Challenges in handling Change

Many organizations today find it challenging to manage change. Many change initiatives in organization fail to bear the desired results. Struggle to implement change usually involve huge budget. When change effort fails to bear intended results, the organizations loose a lot of money. Apart from loss of money, failed change usually lead to wastage of resources such as manpower and time. Failed change has many other negative effects on an organization.

Failed change can lower customers’ confidence, affect employee’s performance and may lower confidence on an organization’s leadership. Any organizations implement change with a desired result. Many changes are intended to improve performance and increases and organization’s profitability. Change in business environment and technological advancement have necessitated changes in organizations. Organizations are spending a lot of money in implementing new systems, streamlining human resources or realigning for global business. Poor change management in such organizations usually lead to resistance, low employee morale and may have far-reaching effects on an organization (Burns 2009, p. 76).

Failures in change management have increased interest on concepts of change management. Managing change is not an easy task as it was previously assumed. Need for frequent changes have made it necessary for organizations leaders to have change management skills. Major issues in change management involves effective planning of the changes and dealing with possible resistance. Employees’ resistance is a major challenge in change management (Cheng & Petrovic-Lazarevic 2005, p. 56). Human resources are some of the most important resources in an organization. Changes that affect employee’s morale may have severe implication on an organization and may affect an organization’s performance on a bigger way.

Change Management at Cadbury

Acquisition of Cadbury by US-based Kraft is a recent change management issue. Cadbury has been a leading confectionery company in Europe. The company was started in 1824 and has consistently been in business its creation. Cadbury is a well established brand that is known in almost all parts of the world. Some of Cadbury products include Cadbury biscuits, Cadbury chocolate, Cadbury cakes and Cadbury ice cream. Acquisition of Cadbury by Kraft raised various change management issues (Lipinski 2010, par 3). The takeover received high resistance from some Cadbury officials, employees and the public.

Acquisition process started in September 2009 when Kraft Foods offered to buy Cadbury at 16.2 billion US dollars. This offer was however rejected as Cadbury argued that the offer was too low for the company. The offer was increased to 18.9 billion US dollars. The takeover was finalized on February, 2010 where Kraft was able to buy 71% of Cadbury shares. The take over has enabled Kraft to be major player in confectionery industry. There were various challenges to Cadbury acquisition. The main challenge was the high resistance that the process experienced. The public, Cadbury employees and the UK government were not for the process.

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There was public disapproval to the process with media reporting high public disapproval in all parts of the country. Various groups and organization such as trade union wedged a fight with the process. Many people believed that the company was an important UK company and should not have been sold to a foreign company (Warrilow 2010, par 5). Formal Prime minister expressed his concern for the sale saying that the company was very important to the UK economy. There were fears that the acquisition could compromise eth fate of more than 30,000 employees that worked for Cadbury. On the other hand, Cadbury stakeholders were against the merger.

Merger is a very major organizational change. Merger or acquisition leads to a lot of changes on operations of an organization. Different operations of organizations involved have to be brought together. The separate identity of merging companies cease to exist and the organizations are known under the same identity. Merging employee of the different organizations is usually the major challenge.

The merger may result in redefinition of roles. In the process some of the employees fear that they may loose their employment. Mergers also have implications on leadership and management. Some managerial and leadership roles may be duplicated leading to conflict. As mergers lead to bigger organizations, there might be need for changes in organizational structure. Change in organizational structure may include creation or removal of some roles. Managing the new and bigger organization may also necessitate organizational changes.

The main motivation for Kraft to bid to acquire Cadbury was to enable to take advantage of Cadbury wide market. Cadbury has been able to acquire large market in confectioneries. Its new markets in places such as Brazil, India and Mexico have high potential of growth (Warrilow 2010, par 3). Kraft’s Chief Executive Officer, Irene Rosenfeld, understands the advantages that acquisition would have on her company. The acquisition, if well managed, can enable Kraft Cadbury take advantage of global business opportunities. Strong Cadbury brand can enable the company to be competitive in confectionery industry.

Change Management issues

Kraft acquisition of Cadbury process left the company with a poor public image. The high public disproval had a negative effect on Cadbury brand. The major controversy resulting from the acquisition is the closer of Somerdale Factory. Kraft had promised to leave the factory open but only announcing to close it only a week after the deal was finalized. This not only raised public disapproval but also lowered employees’ confidence in the new management. Avoiding further damages to the company’s image is one of the most important considerations in implementation process.

Considering that there is great difference in organizational cultures of the two companies, there is likelihood of difficulty in integration process. Innovation and growth in an organization is highly depended on people involved and cultural fit. Integrating the two cultures is a challenging task especially because of poor publicity. Change management in the organization should be able to address people who are most affected by the change.

Cultural and political factors should also be considered in the change process. Resistance to change remain a major factor in implementation process. Employee resistance is anticipated to continue until when the two companies will be fully integrated. The challenges involved can be overcome by proper planning for the changes. Planning for change would allow resources to be allocated responsibly is a way that both short-term and long-term goals of the changes are attained.

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Implementing Change at Kraft Cadbury

Theoretical Framework

There are many change theories. The many theories show change is a real phenomenon that organizations have to deal with. Change in an organization is defined as the efforts that lead to physical, operational to emotional changes. Change in organization is sometime desired in order to achieve some organizational goals and objectives. In most cases change in organization involves moving from certain to uncertain situation (Conner 1998, p. 57). This process of change in organization mostly involves various challenges. Change theories try to explain change in organization can be implemented with less difficulty. Two theories are chosen for the action plan: Lewin’s Three-Step Change Theory and Theory of Reasoned Action and Planned Behaviour.

Lewin identified three steps that are involved in implementing change in an organization: unfreezing, movement and unfreezing. The first step involves unfreezing form the existing situation. The second step is the step that includes the management of the process of change. The third step involves refreezing to other stable situations. In organizational framework the steps of change involves moving from a state of stability to a state of instability and then back to a state of stability. The unfreezing is the step that initiates the change by observing the need for change and taking the desired steps to bring change. Intervention, on the other hand, involves the actions that are taken in order to achieve changes while refreezing involves the steps taken to bring back stability.

Theory of Reasoned Action and Planned Behaviour posits that an individual’s performance of change depend on the individual’s intention. The theory identifies two factors that affect an individual’s attention: attitude towards change and influence of environment (Cheng & Petrovic-Lazarevic 2005, p. 76). The theory observes the need to create favourable environment for change and influence the attitude towards change. On the other hand, the theory of planned change emphasizes the need for control over opportunities, skills and resources required in change implementation.

Change Management Strategy

Implementing change does not involve an individual leader; various individuals are an organization must be involved in order to ensure successful implementation. After the acquisition, Kraft Foods World Travel Retail (KFWTR) has created a fresh leadership team to oversee the process. Andreas Fehr is the managing director and is responsible for overseeing growth in the merged companies. Other members of the leadership team include Thomas Bodenmann, Ivo Knusel, Jaya Singh, Joanne Wiley and Natalia Sanz.

Bodenmann is in charge of growth and operations in Europe, Singh is responsible of Middle East market, while Knusel manages operations in America (Warrilow 2010, par 5). Sanz serves as business manager as well a marketing manager while Wiley is the MD for Cadbury ITR. Apart from their individual responsibility, the new team is mandated with responsibility of ensuring smooth integration of the companies.

Key Factors in Change Management

Change management should address the key factors that may affect change implementation. In the external environment, KFWTR should consider suppliers, labour unions, competitors and market sentiments. Good change management is required in order to ensure that good relationship with suppliers is maintained despite of the acquisition. The main intention of the acquisition was to gain market in confectioneries. The acquisition may motivate the competitors in the industry to adopt new strategies to counter competition. Thus, change management should be able to address competition in order to attain the desired result.

Employees’ resistance is an important factor that should be addressed throughout change management process (Cheng & Petrovic-Lazarevic 2005, p. 61)). Resistance from trade unions is also anticipated, thus, KFWRT management team should be prepared to handle it. Gaining the confidence of shareholders of both companies is one of the major challenging issues. The managing team needs consistent support of shareholders throughout the change management process. To gain this support, the team should show that there is gain in shareholders’ value from the acquisition.

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There must be harmony in the mission and business strategies of both companies. Integration of two merged companies starts with harmonizing business principles and strategies. Both companies must be able to move in the same direction and with similar objectives. For example, the new company must be able to address job security of its employees. In case of laying down some employees, it should be clear whether the employees are laid down for efficiency of for cost cutting. The company should also be able to adopt similar working styles and marketing.

Leadership is an important factor in the success of change management at KFWRT. The major challenge is to ensure that employees and stakeholders are able to gain the confidence of the new management. Resistance to change is highly depended on the trust that those affected by change have in those implementing it (Cheng & Petrovic-Lazarevic 2005, p. 59). The new leadership should be able to establish trusting relationship with employees and other stakeholders. Leaders in the new organization must be keen on communication. Breakdown of communication on issues related to change can lead to implementation problems and increases resistance. The leaders should ensure timely communication of major issues that affect organization or those that are thought to lead to strong resistance.

Organizational cultures of Kraft and Cadbury are significantly different. Merger of the two companies imply that the companies should adopt a similar organizational culture. Integration of the two cultures should be among initial steps in the integration process (Lipinski 2010, par 7). Conflicting culture may interfere with other change process and lead to other problems. Although some changes can be implemented without necessarily having a common organizational culture, integration of the two cultures is required for sustainable change.

Organizational structure has an important role in the success of change implementation. Each of the merged companies had their structure. As one company after the merger, there is for restructuring in order to reflect the changes (Conner 1998, p. 76. Roles of various departments in the organization should be redefined in order to avoid conflicts between different departments in the initial organizations. New organizational structure should define how various departments would relate. It should also elaborate on how employees would cooperate in their duties.

Managing resistance is the most challenging task in managing task at KFWRT. Internal and external resistance can lead to failure of the acquisition. External resistance from the public has already affected public image of the company. Communication is the most important factor in managing external resistance. Management team should be able to anticipate sources of resistance and be able to address them in good time. Timely communication of issues that are thought to lead to resistance would allow enough time to address resistance before implementing changes. In managing employees’ resistance, management team should consider the employees’ individual goals (Conner 1998, p. 78).

Employees should be assured of their job security during the process of integration. If any layout is necessary, there must proper communication. A part from communication, management team should show that they appreciate and care about the workers. Managing employees’ resistance may involve enabling the employees to see the benefits that they could gain from the merger. Training the employees would also have a positive effect to integration process. Training would enable the employees to cope easily with the changes.

Conclusion

Business environment today environment today is changing more frequently than before. Frequent changes in business environment call for the organizations to change in order to cope with the changes. Managing change is a challenge to many organizations as reflected by many failed change implementations. Failure in change implementation has major negative effect on an organization. As most change involve huge amount of money, their failure have major financial implication. Failed changes can also affect an organization’s image and affect its performance. Implications of failed change implementation call for good change management.

Good change management should provide an effective change implementation strategy address resistance to change. Acquisition of Cadbury by Kraft Food experienced both external and internal resistance. Change implementation in the new Kraft Food World Travel Retail not only leads to high public disapproval but also had negative effect on the company’s image. To avoid challenges experienced, individual involved should have embraced good communication, allow enough time for the process and take measures to counter anticipated resistance.

Recommendations

Managing organizations in the twenty first century require quick identification of change needs and implementation of the desired changes. The following recommendations can help an organization to gain competitive advantage through effective change. The recommendations are:

Involve all stakeholders

To be successful in change management, all the stakeholders must be involved. The managers must communicate every step in change process to all stakeholders. Involving all the stakeholders would help to reduce resistance and ensure progressive change.

Communication

Many authors on management emphasize the need for communication in change management. Communication is a major factor in change management in 21st Century. Because of frequent changes in business environment, communication should be enhanced.

  • Become observant and informed on changes in organization’s business environment. This will enable timely identification of change needs and timely solutions.
  • Become aware of the interests of the stakeholders in the organization.
  • Use Lewin’s Three Step Model and Theory of Reasoned Action and Planned Behaviour to understand the implication of change and to manage resistance.
  • Communicate the change process to employee and stakeholders.
  • Highlight the benefits of change to employees and stakeholders.

Reference List

Burns, B., 2009. Managing Change. New York: Person Education Ltd.

Cheng, J. & Petrovic-Lazarevic, S., 2005. Resistance to Change. Monash Business Review. Vol. 1. No. 1, pp. 40-43.

Conner, D., 1998. Managing at the speed of change: how resistance managers succeed and prosper where other fail. Chichester: John Wiley & Sons.

Lipinski, D., 2010. Cadbury-Kraft deal approved amid protest. Web.

Warrilow, S., 2010. Kraft Cadbury-Change Management implication. Web.

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