PRINCIPLES OF CHANGE MANAGEMENT; Case Study with SWOT and PESTEL Analysis

Executive Summary

Change is inevitable and helps an organization to restructure its operations to fit the modern trends. In the clothing industry, the changes happen based on the lifestyle of the individuals, hence the need to understand what to alter in an organization. In the case study of the immediate focus, the company dubbed, Realist Fashion, there is a need to modify the organizational structure as well as incorporate new machine that can increase productivity. Some of the benefits of adopting the changes include reduced maintenance cost, decrease in bureaucracy and increase of productivity. However, if the changes are not enacted, it can result in loss of competitive edge, reduced market share and the chances of employees’ turnover. The paper will focus on change management by evaluating the SWOT and PESTEL analysis, which are established methods of evaluation.

Business Outline

The clothing industry is one of the arenas, that are changing at a rapid rate, contributed to by the modern technology and the changing demands from the customers. More than before, fashion is taking precedence, and a company cannot resort to manufacturing clothes, without first assessing the economic environment(Iglesias,2009). Designs matter in contemporary times since people adapt to change as time progress. To further understand some of the impacts of change in the clothing industry, the focus will be directed to Realist Fashion, which is a company specializing in clothes for all groups of people. The company has been in operation for twenty years and prides itself in the innovative designs that meet the demands of its customers. The number of years this company has been in operation confirms that it has undergone various stages, streaming from the traditional designs of clothes to the current market, which is complex to understand if the appropriate market analysis is not well conducted. The company functions in two areas, being Dunedin and Invercargill, and has a high number of labour force totaling to four hundred staff.

Currently, the company majors on two markets, which are Australia and New Zealand, which have been the optimal support for its operations. However, for the past five years, the performance of the Realist Fashion has been in the decline mode, something that attracts further research, to establish the causative of such dive. According to Iglesias (2009), the sustainability of any business requires an understanding of several factors, and the topmost one is comprehending the changes in the market environment. It is speculated that lack of expansion and seeking other markets could be the sole contributor, to the poor performance of Realist Fashion, which had recorded linear progression for the first fifteen years since it started.

The company has been struggling financially for the past five years, and among the cited cause are increased competition from both the local and offshore investors, increased maintenance costs and shrinkage in NZ dollar. The operating expenditure has been growing since the year 2015 and the projected loss in the year 2019, stands at $-2.9m. The figure justifies the need for changes in operations, to salvage the returns in the future dates. The table below gives a breakdown of the financial performance.

Although the company has been recording poor performance, one thing that stands out is that it provides quality clothing, and the brand image is well established among the customers. What’s more, the need to understand the operation strategies and adapting to change are optimal priorities to improve performance.

Mission

To creates clothes that are of high-quality design and centered on the customers’ needs. We incorporate the ideas of the clients and embrace any change that assists us in serving you in the right manner and make you happy.

Values

Integrity, Team spirit, Quality policy, Perseverance

Vision

To become the world leader in apparel design and manufacturing by using modern technology to connect to our customers.

The Case for Change

According to Nordas (2004), the high production cost lowers the innovation and growth in the clothing industry. However, with the increased competition in the market, the existing companies such as Realist Fashion have no option, but to adapt to the transformations. Being a company that was established twenty years ago, the highest percentage of its working strategies are majorly reliant on the traditional precepts, that never work in the current market. For example, most of the new entrants in the clothing manufacturing sectors are employing artificial intelligence to fasten production. A company relying on old equipment finds it hard to compete favorably, with the one using more sophisticated technologies. The importance of using modern technology in production and changing the strategies of marketing and executing other tasks would help the company to have a fair view of the market. For example, increased production would help Realist Fashion to cover more market, as opposed to the current state where it sells its products to Australia and New Zealand alone.

In a point where the company fails to integrate the changes, it would lose significantly to the new entrants, who can cover full markets through online platforms. The major transitions that are needed are in manufacturing equipment and changing the working strategies in marketing, recruitment, among others. Accessing modern equipment could be costly, estimated to range between $US 25,000-70,000. The implication will be witnessed in two ways; one, the maintenance cost will significantly reduce, and the production capacity heightened. Thus, it will open opportunities in other states, and the company reach a broader market than it presently covers. The payback period is estimated to range between 4-5 years, which is ideal rather than maintaining the current equipment, which is less productive.

Risk Assessment-Benefits associated with making this change are:

  • Productivity will increase. Productivity is defined by Gereffi(1999) as the rate of working per a given time. The new machine would increase the output as opposed to the traditional one that requires a lot of maintenance.
  • Reduced maintenance costs. The new machine is devoid of regular checks, thus would reduce the funds channeled to inspections.
  • Introduction of new technology in production would help the company to understand its customers in-depth and seek new markets offshore. This has an impact of increasing the returns.
  • Change of management strategies would reduce the huge bureaucracy system, and allow the cohesive flow of ideas. Such, it will be easy to share ideas and communicate changes without much delay, hence keep abreast with the competitors in the market.

Risks associated with maintaining the Status Quo

Failure to actualize the proposed changes, there are several risks that the company is exposed to.

  • Lose of competitive edge in the market that is dominated by more innovative companies. The new entrants are coming up with more creative ways to sell clothes, both in physical and online stores which has conquered the modern market. If Realist Fashion fails to integrate such changes, it might soon be faced off the market.
  • Reduced market share, since the innovative companies will dominate local and international markets.
  • The employees would feel threatened, due to the poor performance of the company, thus prompting mass exit. According to Weather (2003), workers need to feel secure in places of work. He noted that the primary cause of turnover is contributed to by lack of surety of sustaining the respective position for long-term basis. Therefore,Realist Fashion should embrace the change lest losing the most experienced design engineers.
  • Tainting the brand image as old equipment would result inthe production of low-quality clothes.

Returning the company to profitability (cost/benefit analysis)

Realist Fashion plans to improve the brand image and expand in other countries other than Australia and New Zealand. This way, the company will collect more revenues, and increases the chances of sustainability, as opposed to the current structure that only targets two states. To achieve this, it is prudent to conduct a market analysis, to establish what the competitors are doing, and the demands of the customers. The entire process of conducting a meaningful analysis would be estimated to take a year. As the company wishes to provide clothing that attracts modern customers, it would require both physical interviews and even utilizing online channels to reach the clientele who are in far locations. According to Nordas (2004), the opportunity for the clothing industry lies among the young people, who are embracing the new trends so fast. Therefore, the company purposes to consider this factor in the future and provide an open system where the management can connect with customers to collect their feedback. The overall project would take four to five years to give significant profit, and it is worthwhile to indulge into.

Environmental Scans

To have a comprehensive overview of the Realist Fashion, it is essential to consider different environments that affect its operation. They are SWOT analysis and PESTLE analysis.

4.1 SWOT Analysis

Strengths Presence of highly skilled labor who have experience for over twenty years.A large number of labor force consisting of 400 employees.The management has extensive experience in the clothing industry. Hence the possibility of expansion is not a big problem. Opportunities The company can expand to other countries other than Australia and New Zealand.Realist Fashion can consider leveraging on online sales to reach to a broad base of customers.The company can affiliate with other reliable vendors to satisfy the customers.
Weaknesses Stiff competition from established clothing companies and new entrants into the market.The company uses old equipment, which costs the company in terms of maintenances.The company has continued to make for the past five years, which prompts the chances of turnover. Threats Changes in regulation can impact the movement of products to the final user.Existing competitors who provide similar products hence subduing the Realist Fashion brand.Changing technology would force the company to restructure its operations.

4.2 PESTEL Analysis

Political Political stability is a huge thing that affects the operations of a business. The uncertainty and lack of conducive trading environment scare aware of the investors.  Both New Zealand and Australia have enjoyed political stability, hence not a significant contributor to the poor performance of  Realist Fashion. Economic Economic fluctuations have a significant effect on the pefemnce of the clothing industry. With NZ dollar declined in value, it was projected that it caused most of the people to have curtailed their spending on expensive clothing. Realist Fashion, being a company for high-end apparel, might havebeen affected negatively by the change in demand. Social factors Millennials are a group of customers who have impacted the changes in the clothing industry. They need not only low priced products, but also modern outfits. The society is growing more discerning. Hence Realist Fashion should consider integrating the same.
Environmental Any business has the responsibility of taking care of what surrounds it. Realist Fashion is using old equipment, that is against the required precepts of going clean and green. Technological Advancement in information technology is a huge issue in the clothing industry. The Internet has given a platform, where sellers can connect with the buyers virtually, thus helping in covering a vast geographic region in sales. Realist Fashion fails to utilize online stores, yet e-commerce is promising in the coming years. Legal The legal decrees abound the clothing industry. The investors in this niche have to comply with the labor laws as well as international guidelines. As time progresses, environmental regulations are getting stiffer. Realist Fashion has managed to operate under all those for the 20 years, but more awareness is needed for it to grow beyond the two countries it sells its apparels.

Business sustainability

Sustainability is defined as the ability of the business to tenure the many storms in the economic cyclicality, and still provide hope of remaining firm in the future. Several factors contribute to the sustainability of the business. One of them is the ability to integrate modern technology, which can improve productivity and enhance the quality of services. In regards to the topic under consideration, replacing the old equipment will fasten the manufacturing process, hence meets the current demands in the market. Also, it would help the business to comply with the environmental regulation as old machines pollute the surrounding more. In the same vein, the diversity experienced in the Realist Fashion is enough evidence of its sustainability. The employees are experienced in design, thus giving hope for the company to continue its existence in the market.

Organizational structures- Current and Proposed.

The current structure

The proposed business structure

The proposed structure is done in accordance with the need to reduce the spending, on some of the roles that can be conjoined and still the company run as expected. The account receivable/payable can be joined into one department labelled as accounts. Also, the HR advisory was eliminated since the HR manager can outsource advisory services at a lower cost. In the same vein, the design team in Dunedin & Invercargill can be combined instead of having separate technical experts.

Change impact

The proposed change would affect several people holding those positions, and the possibility of protesting the change is high. The principal idea of doing so is to reduce duplication of roles, and encourage the employees to work towards the achievement of the business’s goal. The best approach to do so would be to communicate the idea early so that the affected individuals can plan for the exit strategy.

Communication Strategy

Number Activity(what) Method(How) When Frequency Start date
1 Discussing with the CEO and directors on the proposed changes Holding a meeting At the end of the financial year 3 June 1st
2   Discussing with HR of possible implications of the change Holding a meeting July 2 July 2nd
3 Mobilizing the employees to educate them on the possible changes in their roles Holding a meeting August 3 August 3rd
4 Actualizing the changes in roles and introducing new machines No meeting September 1 September 4th
Overall timeline for change: 4 months.


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