Changing Business Culture (AQA A Level Business): Revision Note

Reasons for changing business culture

• Sometimes businesses must change their culture to stay competitive, relevant, or efficient

Pressures for cultural change

Poor business performance

• When profits, sales, or overall productivity start declining, businesses may rethink their existing culture

• If current practices are not achieving the desired results, changing culture can improve employee motivation, introduce more efficient ways of working, and help regain competitiveness

New leadership

• New leaders often bring their own set of values and ideas, different from those of previous management

• They might introduce new attitudes, beliefs, and working practices

• Changing the culture allows the business to align with the new leader's vision, ensuring consistent decisions and clear direction for employees

Mergers and takeovers

• When two different businesses combine, they often have separate and potentially conflicting cultures

• Changing or blending organisational cultures is essential to unite employees, avoid internal conflict, and ensure everyone works effectively towards shared goals

Example

Disney’s acquisition of Pixar involved adopting a more creative and open culture to blend the two businesses effectively

Changing market conditions

• Rapid shifts in technology, customer expectations, or competitor behaviour might require businesses to adapt quickly

• A more flexible culture might be needed so that employees can innovate, respond quickly to customer needs, and keep the business competitive

Societal and ethical pressures

• Businesses must often adjust their cultures in response to changing societal expectations and values, such as environmental sustainability or social responsibility

• Failing to respond to these pressures can damage reputation, customer loyalty, and profitability

• Adapting positively can enhance the business’s image and attract new customers

Challenges of changing business culture

• Changing organisational culture can be crucial for businesses wanting to adapt and improve

• However, many businesses face difficulties during the process, as employees, managers and systems may not easily adapt to new ways of working

Difficulties of changing culture

Culture and competitiveness

• A business's culture directly affects how well it can compete

  • Culture shapes staff behaviour, decision-making speed, innovation and customer experience, all of which influence performance

How a positive culture can improve competitiveness

• A positive culture encourages staff to make faster, more confident decisions

  • This helps a business respond more quickly to market changes or new opportunities than competitors with a more rigid or cautious culture

• It supports innovation

  • Employees who feel trusted and empowered are more likely to suggest and develop new ideas

• It improves customer service

  • Motivated, engaged employees are more likely to go beyond the minimum expected of them

• It helps attract and retain talented staff

  • A strong reputation as an employer makes it easier to recruit skilled people than rivals with a poor reputation

• It also reduces costs linked to high employee turnover, absenteeism or poor performance

Example

Netflix is widely credited with using its 'Freedom and Responsibility' culture, which gives employees high levels of trust and autonomy, as a competitive advantage.

The culture helps it make faster strategic decisions than rivals, including its early shift from DVDs to streaming and later into original content production.

How a negative culture can damage competitiveness

• A negative culture encourages poor decision-making or unethical practices

  • Particularly where staff feel under pressure to meet targets at any cost

• It creates reputational damage that can push customers towards competitors seen as more trustworthy

• It increases employee turnover and recruitment costs

  • Skilled employees leave for businesses with a better working environment

• It reduces productivity and quality

  • Low morale and poor communication make it harder for a business to operate efficiently

Example

Wells Fargo's high-pressure sales culture led staff to open around 3.5 million unauthorised bank accounts in customers' names to meet targets.

When the scandal became public in 2016, the bank was fined $185 million, fired over 5,300 employees, and suffered lasting reputational damage that weakened its position against competitors.