MODULE 4

CHANGES

A. Reading
The main reasons a business fails are resistance to change and or fear of failure.
Owners are accustomed of running their business in a particular way and see no reason to
change. Also, there is a fear that if they make changes in the way they manage their store,
they may fail. Change is considered a bad gamble and status quo is the safe route. It is the
status quo that often results in the business failing. The best companies/owners embrace
their mistakes and learn from them. Retailers must be ready and able to make all the
changes needed to keep their store competitive. They must forget about failure. Failure will
happen if you do not make the changes needed to improve your business. If you wait too
long, it will be too late to revive your business.
When your business reaches a new stage in its development, you may need to change
the way it is organized. For example, as you come to the end of the start-up phase and focus
on developing the business, you may need to create a formal structure so that the business
is better positioned to achieve its objectives. In a start-up, staff numbers tend to be limited so
employees take on multiple roles. As the business and workload grow, it makes sense for
employees to focus on what they do best. Many entrepreneurs choose to bring aboard
professional finance and sales and marketing personnel, for example.
Introducing a solid organizational structure will help you stay in the driving seat while
your business expands. Common ways to expand your business include making a strategic
acquisition or merging with another business. An acquisition is when you buy another
business and end up controlling it. A merger is when you integrate your business with
another and share control of the combined businesses with the other owner(s). There are
many good reasons for growing your business through an acquisition or merger. These
include:
• Obtaining quality staff or additional skills, knowledge of your industry or sector and
other business intelligence. For instance, a business with good management and
process systems will be useful to a buyer who wants to improve their own. Ideally, the
business you choose should have systems that complement your own and that will
adapt to running a larger business.
• Accessing funds or valuable assets for new development. Better production or
distribution facilities are often less expensive to buy than to build. Look for target
 businesses that are only marginally profitable and have large unused capacity which
can be bought at a small premium to net asset value.
• Your business underperforming. For example, if you are struggling with regional or
national growth it may well be less expensive to buy an existing business than to
expand internally.
• Accessing a wider customer base and increasing your market share. Your target
business may have distribution channels and systems you can use for your own
offers.
• Diversification of the products, services and long-term prospects of your business. A
target business may be able to offer you products or services which you can sell
through your own distribution channels.
• Reducing your costs and overheads through shared marketing budgets, increased
purchasing power and lower costs.
• Reducing competition. Buying up new intellectual property, products or services may
be cheaper than developing themselves.
• Organic growth, i.e. the existing business plan for growth, needs to be accelerated.
Businesses in the same sector or location can combine resources to reduce costs,
eliminate duplicated facilities or departments and increase revenue.

1. Answer the questions briefly.

a. What does the text talk about?
b. What is the main idea of paragraph one?
c. Mention supporting ideas of paragraph-one’s main idea?
d. What does status quo bring about in a business?
e. Why must the business change the way it is organized when it reaches a new stage
of development?
f. When does the employee have to focus on what they do their best?
g. Do you think acquisition and merging strategy are the most common ways to expand
a business? Why? Why not?
h. What is the basic different between acquisition and merging strategy?
i. What are the advantages of acquisition and merging strategy?
j. Do you think there are disadvantages the employer can get from acquisition and
merging strategy?

2. State whether the statements below true (T) or false (F). If false, correct them.
a. Reorganizing the business will put it the better position to achieve its objectives.
 b. Revenue can be increased by accelerating business, reducing cost, and eliminating
similar departments.
c. Building better production or distribution facilities is often as expensive as to buy than
the new ones.
d. It is very necessary to have a business equipped with systems that complement its
own and that will adapt to running a larger scale.
e. If the management is struggling with regional or national growth it may well be less
expensive to buy an existing business than to expand internally.
f. Success and failure will happen if the employers do not make any changes needed to
improve their business.
g. Status quo is the safest route to develop and expand the business.
h. It is inevitable to assess the company’s funds and assets before implementing the
development plan.
i. Diversified products, services and long-term prospects of a business can be sold
through other business’ distribution channels.
j. It is believed that if the managements make changes in the way they manage their
business, they may fail.

3. Match the parts of sentences in column A with the other parts in column B.

Column A
1. If you are contemplating a merger
or acquisition,
2. You will need to review salaries
and contracts and make sure
3. If you wait until your business'
position is threatened
4. Proactive change -when
management foresees a change
in the market or economy that will
affect the business
5. Analyzing your strengths and
weaknesses can help
6. Internal business needs may
include the need
7. It is a good idea to work out a
detailed costing of the change
program,
8. You may need to modify your
proposals, policies and
procedures to take into account
9. Make sure that you are not
changing the business just for the
sake of it, and understand
10. If you are considering a merger or
acquisition,
Column B
a. everyone is remunerated and
treated fairly.
b. the people factor becomes hugely
important
c. it may result in defensive and
ineffective management.
d. to raise additional capital or
the necessity of addressing
outdated and inefficient working
practices and processes.
e. changing circumstances in the
business and in the market place.
f. and makes changes in order to
better its position- is much more
effective.
g. so that there aren't any unforeseen
expenses that derail or halt the
reorganization.
h. why you are reorganizing the
business and have a rational
analysis of the situation.
i. you should assess your target
business and talk to those who
regularly interact with it.
 j. you identify potential changes.
B. Structure
1. Fill in the blank with the appropriate modals (will, must, can, should, would).
For example:
An existing strong brand name ___ be used as a vehicle for new or modified
products.
→ An existing strong brand name can be used as a vehicle for new or modified
products.

a. The service you provide your customers ______ be free to them, but you pay
for it.
b. For example, if you provide free parking, you ______ pay for your own parking
lot or pick up your part of the cost of a lot you share with other retailers.
c. Make a list of the services that your competitors offer and estimate the cost of
each service. How many of these services ______ you have to provide just to be
competitive?
d. Are there other services that ______ attract customers but that competitors
are not offering?
e. If so, what are your estimates of the cost of such services? Now you ______
list all the services you plan to offer and the estimated costs.
f. Total this expense and figure out how you ______ include those added costs
in your prices without pricing your merchandise out of the market.
g. Buying anything for the best price ______ be a matter of skilful negotiation.
h. But if you are considering an acquisition, you ______ apply one of the
following methods of valuing the target business.
i. Even if you are not buying the business and are considering a merger, you
______ also be aware of how much the other business is worth.
j. Once you have a location in mind, begin work on your next area of marketing.
How ______ you attract customers to your store?

2. Fill in the blank with the right word form from bracket.
For example:
Sometimes the services are ______ (combine) into vacation packages that include
transfer to the location and lodging.
→ Sometimes the services are combined into vacation packages that include
transfer to the location and lodging.
 a. A budget helps you to see the dollar amount of your ______(expect) revenue and
expenses each month. Then from month to month the question is: Will sales bring in
enough money to pay the store's bills?
b. The owner-manager must prepare for the ______ (finance) peaks and valleys of the
business cycle.
c. Cash forecast is a ______ (manage) tool that can eliminate much of the anxiety that
can plague you if your sales go through lean months.
d. Is ______ (add) money needed? Suppose at this point that your business needs
more money than can be generated by present sales.
e. What do you do? If your business has great ______ (potency) or is in good financial
condition, as shown by its bank balance sheet, you will borrow money (from a bank
most likely) to keep the business operating during start-up and slow sales periods.
f. The loan can be repaid during the fat sales months when sales are ______ (great)
than expenses.
g. Adequate working capital is needed for ______ (succeed) and survival: but cash on
hand (or the lack of it) is not necessarily an indication that the business is in bad
financial shape.
h. A ______ (lend) will look at your balance sheet to see the business' Net Worth of
which cash and cash flow are only a part.
i. The sample balance sheet ______ (state) format shows a business' Net Worth
(financial position) at a given point in time, say as of the close of business at the end
of the month or at the end of the year.
j. Even if you do not need to borrow money, you may want to show your plan and
balance sheet to your ______ (bank).
k. It is never too early to build good ______ (relate) and credibility (trust) with your
banker.
l. Let your banker know that you are a manager who knows where you want to go
rather than someone who ______ (mere) hopes to succeed.

C. Vocabulary
Fill the blank with the words available in the box
Consider advertising last, after you have determined your image, price range, and
customer services. Only then are you ready to _______ prospective customers why they
should shop in _______ store. When advertising dollars are limited, it is _______ that your
advertising be on target. Before _______ can consider how much money you can _______
for advertising, take time to determine your _______ goals. What are the strong points of
your _______? What makes your store different from your _______? What facts about your
store and its _______ should tell prospective customers?
When you have _______ these questions, you are ready to think _______the form and
potential cost of your advertising. _______ the local media (newspapers, radio and
television, and direct mail pieces) for information about the _______ and results they offer for
your money. _______ you spend advertising money is your decision, _______ don't fall into
the trap that snares _______ advertisers who have little or no _______ with advertising copy
and media selection. Advertising is a _______. Don't spend a lot of money on advertising
_______ getting professional advice on what kind _______how much advertising your store
needs.
When you _______ a figure on what your advertising for the _______ twelve months
will cost, check it _______ what similar stores spend. Advertising expense is one of the
_______ ratios (expenses as a percentage of sales) that trade associations and other
organizations _______. If your estimated cost for advertising is _______ higher than this
average for your line of _______, take a second look. No single expense item _______ get
out of line if you want to make a _______. Your task in determining how much to spend for
advertising _______ down to the question, "How much can I afford to spend and still do the
job that needs to be done?"

Paragraph Words
advertising merchandise tell vital you your afford store
1 competitors
answered experience services but many profession about ask
2 without and

operating gather merchandise should profit comes substantially

3 have next against

D. Speaking
Read the following passage to get the idea of “Relocation”, and present orally in front of the
class what you have understood. Be prepared to answer questions from your friend.
If your business is growing rapidly, you may decide to move premises to accommodate
extra staff. Or you may want to reduce costs by moving to a location that is cheaper
or nearer to customers, labor or transport links. Relocation is stressful, so make sure that
new premises have quantifiable advantages over the old ones to justify this upheaval.
Potentially, the most damaging effect of relocation can be the ability to retain staff.
Develop a relocation support package for employees who are moving with you and consider
further financial incentives to retain key staff. Check out the quality, availability and costs of
labor in the new area. Consider and consult with suppliers and customers - if your current
 suppliers face problems delivering to your new location then you'll need to find new ones, for
example.
Thorough research, proper planning and effective execution are essential to ensuring
relocation is as smooth as possible. It is a good idea to set up a small team of employees
who have the authority and management backing to take decisions. You could also hire a
relocation agent if you feel you don't have the relevant skills in-house.
1. Do you agree with the idea that passage convey?
2. Say your opinion changes that are needed by your company.
3. Discuss with your friend how to develop your kitchen-set company.

E. Writing
1. Read the story of Mr. Jet carefully to get the idea and the similar story.
Mr. Jet on the East Coast maintained a dock and sold and rented boats. He thought he
was in the marina business. But when he got into financial trouble and asked for outside
help, he learned that he was not necessarily in the marina business. He was in several
businesses. He was in the restaurant business with a dockside cafe, serving meals to
boating parties. He was in the real estate business, buying and selling lots. He was in the
boat repair business, buying parts and hiring a mechanic as demand arose. Mr. Jet was
trying to be too many things and couldn't decide which venture to put money into and how
much return to expect. What slim resources he had were fragmented.
Before he could make a profit on his sales and a return on his investment, Mr. Jet had
to decide what business he was really in and concentrate on it. After much study, he realized
that he should stick to the marina format, buying, selling, and servicing boats.
Decide what business you are in and write it down. Define your business. To help you
decide, think of answers to questions like:
1. What do you buy?
2. What do you sell?
3. Which of your lines of goods yields the greatest profit?
4. What do people ask for?
5. What are you trying to do better, more of or differently than your competitors?

2. Case Study: A Problem of a Hostile Takeover

Working in groups, read the following case study. Discuss the problem, answer the
questions, and write a brief report on how your group would solve the problem. (Choose one
member of the group to do the writing.) Follow the format in Appendix E (Case Study Report)
in writing your report.
 International Airlines, which has never recovered from the October 1987 stock market
crash, is struggling to stay alive. An IA stock selling for $28 one year ago now gets about
$14, and IA appears to be vulnerable to a hostile takeover. In fact, the employees of IA have
heard a rumor that Roland Crane, the infamous corporate raider and takeover artist, is
preparing to stage a takeover of their once highly successful company. Crane is known as a
cut-throat manipulator who treats his employees poorly and has little concern for the long-
term growth and future of his companies. However, his wealth and power are so great that
Crane usually gets whatever he goes after.
George Harris, the Chief Executive Officer (CEO) of IA, is determined to prevent the
hostile takeover from succeeding. He is willing to use almost any tactics to achieve his goal.
Harris has called an emergency meeting of the company’s upper management to brainstorm
a strategy to use in overpowering Crane’s bid. The word on Wall Street is that Crane will
make his move in the next ten days. Harris is leaning toward an Employee Stock Ownership
Plan (ESOP), allowing IA employees to become employee-owners. IA could borrow money
from a bank to establish an ESOP trust, which would buy shares of IA stock. Then the shares
would be released to IA employees based on each employee’s salary. By placing IA in an
employee stock ownership plan, IA would change from a publicly owned to an employee-
owned company, thus preventing takeovers. Now employees own about 10 percent of the
stock, and with an ESOP, Harris thinks he could boost that to 55—60 percent. An ESOP
would give employees an incentive because they would be working for themselves and
taking a bigger role in running the company.
Patrick Fitzgerald, the Chief Operating Officer (COO) of IA, also has a proposal to
present at the meeting, but it is quite radical. He wants to convince the company executives
to attempt a last- minute merger with Worldwide Airlines, thus making Crane’s takeover
financially unfeasible. He knows, however, that he will face a great deal of resistance,
especially from Paul Bergman, President of IA, and the senior executives. IA and WA went
through an unsuccessful merger attempt last year, and there are hard feelings on both sides
as a result. The merger failed because IA and WA executives couldn’t agree on either the
restructuring of the new organization or the company’s long-term objectives, but Fitzgerald
has reason to believe WA would be open to a deal.
Paul Bergman, President of IA, has rarely agreed with George Harris about anything,
and now is no exception. Bergman has his own plan to present at the meeting. He and some
other senior executives want to do a leveraged management buyout (MBO)* and buy IA
themselves. Then IA would be a privately, not publicly, held corporation, which would protect
it from any takeover attempts. Bergman knows their offer will have to be a fair one—and
above the price of IA stock on the market—perhaps even $20 a share, but he thinks it’s
worth it. The only problem is how to raise the cash needed to buy the company. He is
working on this and has already contacted several major banks that have tentatively agreed
to provide financing at around 10 percent interest. Nothing has been settled, but he is
hopeful that he’ll have a viable solution by the time of the meeting. He heard that Harris will
push for a merger with WA, which makes him angry. IA and WA have completely divergent
long-term goals and company values. If they merge, he’ll take early retirement. In Bergman’s
eyes, the only way for IA to stay alive is to go the MBO route.
Questions
1. How should Harris present his ESOP plan at the meeting?
2. Should Fitzgerald contact executives at WA about a merger?
3. How should Bergman present his MBO plan at the meeting?
4. Should Bergman meet with Hams before the meeting to try to convince him of a
leveraged management buyout (MBO)?
5. What other options do IA employees have?

Solution: Case Study Report

I. Define and analyze the problem.
II. Suggest possible solutions.
III. Evaluate possible solutions.
IV. Select a solution.