Background To Change In Todays Economy Commerce Essay

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Miele - founded in 1899 - is a famliy owned and family run company. Although the workforce numbers over 15,000, including more than 10,000 in Germany. With its own sales subsidiaries in 38 countries and represented by importers, Miele is the only premium brand in the household appliance industry which is represented on all five continents.

Miele is a German brand for which 'Made in Germany' is a very important international hallmark of quality. Miele's company motto is 'Forever better'. This maxim is the guideline for our products and every Miele employee worldwide.

In Germany Miele production takes place in eight plants. The responsibility for sales and distribution is decentralised in six branches in Germany, one of them located in Hamburg.

The market for white goods in Germany is changing and becoming more competitive through globalisation. New international competitors (e.g. from Asia) which are formally known as manufacturers of consumer electronics are trying to expand within the European and especially the German market for white goods.

The declining number of dealers on the one hand and new competitors with concentration of market power through price pressures on the the other hand are influencing Miele's sales activities.

In today's highly competitive business environment, management of change is essential for a large corporation to survive and prosper. The firm must improve both the internal and external situation, evaluate the progress and make adjustments as necessary to stay on track.

The results and given examples of this assignment relate to the German market and Miele's German subsidiary.

2. Background to change affecting the current organisation

Background to change in today's economy

In today's highly competitive business environment there are a lot of changing factors which influence the development of the company. The firm must improve their business organisation to define objectives and asseses and make adjustments as necessary to stay on track.

The Ansoff 'Product-Market Growth Matrix' is a marketing tool created by Igor Ansoff (Lynch 2002:461) The matrix allows to consider ways to grow the business via existing and/or new products, in existing and/or new markets. There are four possible product/market combinations:


Existing Products

New Products

Existing Markets

Market Penetration

Product Development

New Markets

Market Development


Diagram 1: Ansoff's 'Product / Market Matrix' (Lynch 2002:461)

This Ansoff matrix helps companies to decide what course of action should be taken for having a good performance.The following strategies are appropriate for Miele:

Product development: A launch of new products/services with unique features

Market development: Miele washing machine 'medicwash' is to date marketed for allergy sufferers. This mashine could be rebranded for a new target group like expectant mothers.

Diversification is appropriate for entering new markets where Miele has no presence. The distribution of cleaning accessories and detergents are called exemplarily.

Michael Porter's well known 'Five Forces of Competitive Position Model' (Porter, 2004) provides a simple perspective for assessing and analysing the competitive strength and position of a business organisation:

Competitive Rivalry:

number and size of firms

industry size and trends

fixed vs. variable cost bases

product/service ranges

differentiation strategy

Supplier Power:

brand reputation

geographical coverage

product/service level quality

relationships with customers

bilding processes/ capabilities

Product and Technology Development:

alternatives price/quality

market distribution changes

fashion and trends

legislative effects

Buyer Power:

buyers choice

buyers size/number

change cost/frequency

product/service importance

volumes, JIT scheduling

New Market Entrants:

entry ease/barriers

geographical factors

incumbents resistance

new entrant strategy

routes to market

Diagram 2: Porter's Five Forces of Competitive Position applied for Miele

The following key implications for Miele are expected according to Porters Five Forces:

New Market Entrants:

More competitors through globalisation

Increasing competitive and pricing preasure

Copies of Miele's innovations, e.g. honeycomb drum

Supplier Power:

Rising supplier power through scarcity of raw material e.g. steel and crude oil

Declining supplier loyality based on backup capacity

Concentration of suppliers is raising their power

Buyer Power:

Customers expect top qualitiy and an after-sales service for their products

Customers can compare prices easily via Internet

Decreasing brand loyality of customers

Power of the technical superstores is increasing, the number of independents shops is declining

Product and Technology Development:

Customers substitute Miele's Rotary Ironer by buying non iron clothes or bringing their clothes to a laundry

Customers expect top qualitiy of their products

The development of new products and innovations is expensive

Competitive Rivalry:

Escalating competitive environment

New competitiors try to win market shares

Predatory pricing policy is expected

The models from Ansoff and Porter clarify the basic necessity of change in today's economy. The management of the company is responsible for evaluation and definiton of the areas of operation.

2.2. Strengths and weaknesses of bureaucratic organisations

Bureaucratic organisations are often appropriate in stable environments and for routine tasks and technologies. Bureaucratic structures have clear, well defined, centralised and vertical hierachies of command, authority and control.

Bureaucratic organisations have the following strengths:

Formal rules and behaviour bounded by rules

Uniformity of operations continuity despite changes in personnel

Systematic allocation of tasks

Impersonal orientation

Membership constitutes a career

The other side of the coin is that bureaucratic organisations have obviously several weaknesses:

Inflexible in decision making

Lack of empathy/rationality

Highly regulated which signifies that decision making is slow (no urgency or


Positions are organised in a hierachy of authority which limits employee in

decision making

Many different stakeholder groups with various expectations

An important step is to assess Miele's current situation as a bureaucratic company. It is necessary to find out where the company is now, which is the prefered way to go and what are the company's choices. For reviewing the potential options of change several criteria and useful models are applied. The SWOT Analysis (Lynch 2002:104) is valuable for finding out the company's strengths, weaknesses, opportunities and threats:










What does Miele do well?

What unique resources can Miele draw on?

What do others see as Miele's strengths?


What could Miele improve?

Where does Miele has fewer resources?

What are others likely to see as weaknesses?

Customer confidence

Strong product brand

Market & product knowledge

High quality products

Wide distribution

Financially independent

Family owned and run company

Most products are 'Made in Germany'

Only products in high price segment

Outdated company structures

Long response times to changes

High manufacturing costs

Decline in market segment

Long product life cycle

Poor cost management










What good opportunities are open to Miele?

What trends could Miele take advantage of?

How can Miele turn strengths into opportunities?


What trends could harm Miele?

What is Miele's competition doing?

What threats can expose Miele's weaknesses?

Open up new markets

Change in company management

Focus on new target groups

Improve cooperation with key accounts

Target new trends like 'homing' and 'simplicity'

Extend product range for target groups and niche markets

Increase customer loyality through service offers like leasing or installment

Increasing competetive pressure

No experience in other business fields

Worsening economic conditions

Globalisation and pricing pressure

Competitors access into Miele's price segment

Loss of innovative leadership

Diagram 3: The Miele SWOT analysis (, 2009)

The SWOT-analysis shows that Miele has long response times to changes. This could lead to a competitive disadvantage, if Miele needs too much time for putting changes into practice.

The most important problem for bureaucratic organisations is to integrate the different stakeholder-groups in the strategy of change and the planning process for reaching consensus and their support.

The 'Johari Window Model' clarifies that it is important to bring every stakeholder in the open/free area:

Diagram 4: The 'Johari Window Model' ( online 2009)

But this is a weak point for bureaucratic organisations like Miele because they have to involve many stakeholders with wide interests (more information, point 3.1.).

2.3. Alternative forms of organisational development

Organisational development is a planned intervention designed to effect change in some facet of an organisation. Interventions have been developed over the years to address different problems or create various results with the intention to improve the entire organisation through change. In general, organisations that wish to achieve a high degree of organisational change will employ a full range of interventions:

Human processes, e.g. team building and process consultation

Technostructural, e.g. Total Quality Management, work/job design

Human resource management, e.g. performance management (employee), reward systems

Strategic, e.g. cultural change, strategic mangement

The change of the business environment requires a change for every company to stay on track. As mentioned above is the team buliding process one important sector for organsational development. Dr. Bruce Tuckmann published 1965 his 'Forming Storming Norming Performing' model which is an helpful explanation of team development and behaviour.

The intention is to bring the team to the performing phase stage 4, because that's the phase where the team and its leader have the best performance and achieve the goals and objectives of their company:

Diagram 5: Bruce Tuckman's 'Forming Storming Norming Performing Team Development Stages Model' -1965, ( online 2009)

Another tool for understanding problematic situations and for planning corrective action is Kurt Lewins 'Forced Fiels Analysis':

Diagram 6: Kurt Lewin's 'Forced Field Analysis' (Value Based, 2009)

The Action plan tailored to Miele is as follows:

Forces for change

Forces against change

No action required

Involvement of key staff in designing new process

Review of new process with experts to ensure 'Best Practice'

Key staff coaches other staff members during change

Diagram 7: Action plan according to Kurt Lewin's 'Forced Field Analysis'

The model from Lewin illustrates the necessity to involve the staff and the stakeholder in the process of change because otherwise the overbalanced forces against change prevent the successful implementation.

3. Systems for involving others in the process of change

3.1. Systems to involve stakeholders in the introduction of change

For a large company like Miele it is essential to integrate the different stakeholder-groups in the strategy and the planning process for reaching consensus and their support.

Miele's most important stakeholders are:

Members of the owner families

Executive Members


Workers committee and Trade union

Customers and suppliers

For the integration of these stakeholder groups the following actions are proposed:


Action / Briefing

Responsibility for information

Members of the owner familiy

Annual conference

Top management

Non involved executive and middle management

Annual general meeting

Top management


Staff meeting, notice board, suggestion scheme, working groups

Every manager / head of department

Workers commitee and trade union

Commitee / union meeting, management letter, working groups

Employers's federation,

press office

Customers and suppliers

Newsletter, trade fair, product presentation, events, workshops

Head of Marketing/Sales, Purchasing

Diagram 8: The integration of Miele's stakeholders

It is fundamental for a large company like Miele to involve the stakeholder groups in the process for gaining their support in reaching the strategy goals and objectives.

According to Belbin's 'Team Roles' it is helpful for a bureaucratic organisation like Miele to integrate stakeholders e.g. in project teams which evaluate the need of change and the implementation process. It is a duty of the management to find the best possible compositon with several roles in the team:

Diagram 9: Belbin's 'Team Roles': A * means these are more introvert roles,

( online 2009)

For a successful involvement of stakeholders in the process of change, the existing management style is decisive. There are two management styles according to Douglas Mc Gregor's 'XY Theory', the 'authoritarian management' (theory x) and the 'participative management' (theory y) style:

Diagram 10: Douglas McGregor's X-Y Theory ( online 2009)

The behaviour of 'theory y' manager subserves the involvement of stakeholder in the change process, because they have the capacity to use a high degree of imagination, ingenuity and creativity in solving organisational problems. Enlightened managers use 'theory y', which produces better performance and results and allows people to grow and develop.

Analysis and evaluation of these systems

The theoretical approach of Belbin or Mc Gregor clarifies the importance to involve both the management on the one side and the stakeholder on the other side in the process of change. This means for Miele that it is helpful to integrate the stakeholder in the future more than at present. Interviews with employees show that they are unsettled regarding

new processes. The outcome for the company increases with timely staff information and collaboration within these processes. The management plays the key role, because their management style and success in selling the ideas to the stakeholders is essential for the achievement of the objectives. Miele should intensify the involvement of their stakeholders as proposed at point 3.1 to gain a better acceptance, comprehension and encouragement from them.

4. Plan for implementation of models for ongoing change

Appropriate models for change

John Kotter defined a helpful model for understanding and managing change. Each stage acknowledges a key principle identified by Kotter relating to people's response and approach to change, in which people see, feel and then change. Kotter's 'Eight Step Change Model' (Kotter and Cohen 2002) can be summarised as:

Establish a sense of urgency

Create a coalition

Develop a clear vison

Share the vision

Empower people to clear obstacles

Secure short-term wins

Consolidate and keep moving

Anchor the change

According to Kotter, it is crucial to follow the eight phases of change in the above exact sequence.

Another appropriate model is Kurt Lewin's 'Change Model' which defines three stages in the process of change:

(1) Unfreezing

(2) Change

(3) Refreezing

It assists organisational change by allowing the process to be understood and by providing milestones for evaluating progress towards the change.

Kotters 'Eight Step Model' and Lewins 'Change Model' can be adapted for Miele's change process as follows:

Diagramm 11: Miele's way of change adapted from Kotter's 'Eight Step Change Model' and Lewin's 'Change Model'

The development, involvement of stakeholders, implementation, controlling and if applicable adjustment of a change process is a long lasting challenge which is one of the main duties of the company's management.

Planning of implementation process and outcomes

To ensure that all staff are aware of the change process and what his or her duty to reach the strategic goals of the company is, a implementation process for gaining commitment is required. For this process it is appropriate to cover the following points:

Total Miele organisation agreement to full plan

Inter-department agreement to each other's plans, e.g. budget impact between units and human capital planning (having the right people in the right place at the right time with the right skills)

Enthusiastic announcement

Tracking and course adjustments

Using Balanced Scorecards Concept for planning implementation to analyse the cause and effect of the business process

Existence of timetable with responsibilities for accomplishing the change process:

Actions: Responsibilities













Mission / vision statement: Top Management

Environmental scanning: Top Management

Change process formulation: Top Management

Change process implementation, Information of owner families: Top Management

Change process implementation, kick-off meeting for workforce: Top Management

Departmental meetings for business units: Line management

Notice board information for workforce: Head of Business Units

Staff training sessions/workshops, ideas for process' improvement: Head of department

Annual performance review of the management with target-performance comparison: Top Management

Change strategy and target review, if applicable adjustment: Top Management

Diagram 12: A timetable for implementing the Miele change process

One key task of the management is to raise the staff motivation. Information about the changing process and the implementation process are inevitable. According to Herzbergs 'Two Factor Theory it is furthermore essential for the management to have a positive impact towards the 'hygiene' and 'motivation' factors:

Diagram 13: Frederick Herzberg's 'Two Factor Theory' (Value Based, online, 2009)

Typical hygiene factors which are a strenght of Miele are working conditions, salary, security and company/brand status. But there are also weak points which could be improved to motivate the staff like recognition of achievement, responsibility for tasks, advancement to higher level tasks and personal growth. Herzberg's theory shows that it is important for a company to have enough and strong 'hygiene' and 'motivation' factors to have satisfied and motivated employees.This is the ideal situation where employees are highly motivated and have few complaints.

During the whole change process it is the responsibility of the top and the line management to support the staff and ensure, that no one is losing direction and is able to fulfil the expectations:

Diagram 14: John Fisher's 'Process of Transition' curve ( online 2009)

The progress of John Fisher' transition curve clarifies that it is a key task of the whole management to help people through the process as effectively as possible. It is mentioned that every person will experience transition through the curve at slightly different speeds, depending on his/her self perception, locus of control and other past experiences and how these all combine to create his/her anticipation of future events.

5. Summary

This report clarifies that several steps have to be taken for a successful change process. The first step for the company is to recognise that a change process is necessary to improve the business organisation. The second step is obtaining the environmental scanning. Third is the change process formulation, stakeholder involvement and the implementation of the process within the company. The last step is to evaluate and control the change process and if applicable process and target adjustment.

The involvement of stakeholders is essential for a successful realisation because otherwise they could have negative impact towards the process' performance.

Furthermore, critical standpoints like business ethics and corporate social responsibility have to be covered to have a positive response from the public.

The change process implementation, controlling and if applicable the adjustment is a long lasting and ongoing process which is one of the main duties of the company's management.

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Kotter J and Cohen D S (2002) The Heart of Change; Real Life stories of How People Change Their Organisations, Boston, Harvard Business School Press

Lynch, R (2002) Corporate Strategy, London, Prentice Hall

Mind Tools Ltd.,, 2009, SWOT Analysis worksheet (online, cited 10th April 2009)

Porter, M. E. (2004) Competitive Advantages: Creating and Sustaining Superior Performance, New York, Free Press Export

Value Based (2009), Force Fieled Analysis - Lewin, Kurt (online)

(cited 20th April 2009),

Value Based (2009), Two Factor Theory - Herzberg, Frederick (online) (cited 20th April 2009),