The 5 levels of change

We face opportunities and challenges everyday. Taking advantage of the opportunities or managing the challenges involves change and maybe moving workers out of their comfort zone. Each challenge or opportunity requires different management and change level. The following is a spectrum of change levels that will cover almost every challenge faced in business.

Level 1: Improve efficiency

2014-12-19 20.51.12Improve efficiency by determining if workers are putting the right effort at the right place. Take a look at the current work practices and if the workers are doing what they are suppose to do.
Worker competence and willingness to work are two major factors at this level. Superstars in box 1 are those who are competent and willing to work. They are go-getters who you only need to describe the job for them and they will execute it flawlessly. Workers in box 2 are good workers who are willing to work, but not competent enough to execute a faultless job. Training and development are the solution to increase the workers’ efficiency in this box. Competent and experienced workers in box 3 are unwilling to do their jobs for different reasons. Motivation may help improve the efficiency in box 3 but the workers are choosing not to work for different reasons. Workers in box three knows the rules and regulations, knows the lube holes, shortcuts and exceptions. Troublemakers are usually found in this box and the leader or manager should be careful with them. Workers in box 4 are either new workers or older workers who’ve been moved to a new job without proper training. Their unwillingness to work may be affected by their incompetence or the neglect they feel after they have been assigned to their new role. The leader should either replace workers in the box or train and motivate them to do their jobs.

Level 2: High performance.

Importance vs UrgencyExecuting the right business process. Focus on the important and not urgent part of the business before they become important and urgent. Important and urgent businesses are usually executed in a firefighting mood which lead to mistakes or substandard jobs. Organize work by using the right procedures and setting priorities with key performance indicators and milestones. Pareto Principle states that 80 percent of all the things being done are executed by 20 percent of the right effort by the right people. Assign the right workers with the right resources to high yielding part of the business.

Level 3: Improve, eliminate and copy.

Cut or improve some of the steps from the best process recognized for the business. In level 2 we selected to automate processes to conduct the organizational business, but we need to improve or trim some of the redundant steps that take up time and recourses with little or no positive effect. Redesign the business process by eliminating the unnecessary steps, improve vital steps and imbed best practices in the process. Revisit the business process with fresh and unbiased eyes. Some of the steps in the process were put to inflate somebody’s ego. Other steps were useful for many years, but became absolute now. Some activities and regulations are practiced in the organization for no apparent reason. When asked, the workers will say “we always do it this way, but we are not sure why!” Simple questions can reveal a lot of wrong practice. The same simple questions can be directed to top management and floor workers.

2014-12-17 08.53.29Organization’s do not work soon. Competitors with similar products are produced by similar processes or even better. The organization should explore how others are executing their businesses and find ways and means to adapt them in the organization. Change will always have resistance from workers living in their comfort zone. Not Invented Here (NIH) is one of the hurdles that workers used to stop or even sabotage processes or practices they did not develop internally in the organization. Workers ego and selfishness will find faults and difficulties in the new best practices they did not develop. Resistance can be handled by explaining or demonstrating the benefits of the new best practice and how it may help the workers in their daily work.

Level 4: Think out of the box.

Brainstorm new idea nobody thought could be possible or feasible. The new ideas may have a slim chance to succeed, but experimenting with these ideas after careful thought may yield great results. The new ideas may lead to other possibilities worth further exploring. Integration between different tools or technologies can result in different possibilities and products. New ideas are always welcome, but implementing them will face Great resistance. Change management is a major factor in getting the new ideas go through the comfort zone.

Level 5: Breakthrough.

Complete shift in the thinking paradigm. In this level the business owner was exploring new territories that never been explored before. The breakthrough might be in changing the future direction by more than 90 degrees. Intel dropped the memory chip business and pursued the processor business. Steve Job reduced the Apple products from 12 to only fore after his legendary return to Apple.


Bargaining Power of Customers (Porter’s 5 Forces)

Five Forces - CustomerAn evaluation of how it’s simple to drive costs down for the customers. The customer can influence the price and terms of purchase and may request better service and product quality. The customer power is magnified when the market has many sellers and fewer customers. The switching cost from one seller to another is another factor in the buyer’s bargaining power. The buyers switch to another seller if the products are similar and there is no significant cost to switch. The washing machine detergents are almost similar and do the same cleaning. Dental care products are almost the same with different flavors. Online search engines are another example of service similarities. Users may switch because of a delay of a fraction of a second during the search. The customer will buy another toothpaste because of the new flavor of the month. In undifferentiated market, the brand loyalty between the buyer and seller could be the only reason why a consumer sticks with one seller over the other.

The customer may switch to another product if the customer is well-deducted about the product and have price sensitivity. The availability of the product substitute makes the seller weaker relative to the customer bargaining power. Supermarket shelves in most countries are stacked with different bands of a similar product that the consumer can conveniently choose from according to the brand name, price tag, or attractive packaging.

Regional small farmers, selling most of their farm products to a large supermarket chain have little influence on the terms of the sale. The farmer may opt not to sell to the supermarket at the price they set, but then the farmer has to endure the additional transportation cost to sell his products to another market.

Threat of New Entrants (Porter’s 5 Forces)

Five Forces - Entrants

Lucrative markets attract new entrants unless the existing organisations have a strong barrier to entry. If it is easy to make and sell what the organisation is selling then every other organisation would love to jump in and produce the same product and market it to the consumer. The organisation should have barriers to its share of the market to stop the new entrants from taking a slice out of it.

One of the best barriers is the economy of scale. Economy of scale is achieved when more products or services are obtained with the same fixed cost. A good example would be the neighbourhood bakery. The fixed cost for the bakery is the skilled bakers, the oven, and the store rent. The bakery would be losing money if they produce and sell a few items every day, but the bakery will have excellent economy of scale if the bakers work all of the time and the oven is always full of white dough turning to golden cakes and bread. The fixed cost will be distributed over multiple products and the production cost of each unit will be low. New entrant has to achieve this production and selling scale to be profitable otherwise they will not be able to enter and compete with the existing organisation.

Another example of the economy of scale is the Microsoft Excel. Competitors of Excel have to be widely distributed and adopted to be able to compete. The cost of switching to Excel to another spreadsheet software has to be very low, or maybe free to attract new users. Google offered Google Spreadsheets free online and offline for all users and it is making a good gain in the spreadsheet market share. Brand name can be a useful entry barrier when new organisation try to muscle in its way into the market. In the case of spreadsheet market, both Microsoft and Google are excellent brands and will have a fair chance to compete.

Product differentiation and location are strong entry barriers. Using the bakery example above would be a good illustration for these entry barriers. The bakery should have a good location and access to the costumers to make it more attractive for the customers. New competing bakery will have difficulty attacking the costumers if store is located in the back of a shopping mall or in a remote area. The customer will not go to the new bakery unless it has products the other bakery does not offer. The new bakery can specialize in birthday, wedding, and special occasion cakes which will make the costumer reach for it for that special social event.

The pharmaceutical industry illustrates three major entry barriers. Initial capital investment, government policy, and technology propriety (patent). The pharmaceutical industry invents heavily in research and development to generate a promising medicine that they can patent and sell in the market for many years in the future. The pharmaceutical life cycle from an idea to introduction to the market is averaging around 8 years. The FDA takes at least one year to approve the drug and only three out of twenty drugs turn out profitable. The patent may prevent other pharmaceutical organizations from copying the formula, but the customer will find generic products, which have the same effect, in the market within one year after launching the drug in the market.

Read also The Suppliers Bargaining PowerBargaining Power of Customers

The Suppliers Bargaining Power (Porter’s 5 Forces)

Supplier power is an evaluation of how easy it is for providers to drive costs up. The supplier power is driven by the singularity of the product or service; the number of suppliers; relative size and strength of the supplier; and price of changing from one supplier to another.

Located in London and South Africa, DeBeers controls 58 percent of all rough, uncut diamonds sold worldwide until 2004. DeBeers had to pay a $10 million to settle a 10-year-old indictment. The settlement was huge but gives DeBeers a bigger marketing presence and greater legitimacy with U.S. consumers. However, DeBeers market share eroded as new profitable mines were discovered in Russia, Australia, and Canada and those miners started selling to the market directly without the help of DeBeers.

TheFive Forces - Suppliers suppliers power increase if there are fewer suppliers in the market who can form a monopoly or duopoly on the buyers. The same power will decrease if there are alternatives to what the suppliers are selling to the buyer. For example, if natural rubber farmers form coalitions and start raising their prices, then the buyers may switch to synthetic rubber as a suitable alternative. However, if both producers of natural and synthetic rubber form a consortium and start raising their prices then the buyers are forced to accept the higher prices (or pass the additional cost to their customers) until the buyers can find a good and reliable alternative for rubber.

Sometime the alternative is available, but the switching cost from one supplier to another is higher than accepting the original supplier’s prices. Professional video editors are on the look for the latest tools and gadgets to improve their skills and performance. However, the cost of abandoning Final Cut Pro and switching to Adobe Premier Pro maybe too much because of the price they paid to buy the editing software. Another cost to consider is the skill and experience they build up by using one system and they have to re-learn again for the new software. Similar situation is faced by international organisations when they consider switching from Oracle to SAP or for the airline companies to switch from Airbus to Boeing.

The supplier may not decide to raise the price but forward integrate its business. A fishing company that has boats to catch fish in the sea is a supplier to the fish market and the local distributors. The same fish supplier may decide to integrate its business to catch the fish then open stores in the same neighbourhood to sell the fish directly to the customers. The supplier will disrupt the market by taking the distributor’s business and competing with the local fish stores. The same example may apply to Airbus or Boeing if they chose to build the plane and then set up their own airline company.

Read also Threat of New Entrants (Porter’s 5 Forces)Bargaining Power of Customers

Competitive Advantage

Market imperfections can be in the form of monopoly, externalities or public goods, but sometimes defined as anything that interferes with trade (DeGennaro, 2005). The organizational competitive advantage can be achieved by adapting to the external trends and events and adapt to the changes in capabilities and resources. The organizations can make the competitive advantages by formulating and implementing strategies that help adapting and taking advantage of these changes (Ogrean, Herciu, & Belascu, 2009). Organizations can definitely take advantage of the market monopoly and keep up its position until another competitor force its market penetration. Externalities can be used as a competitive advantage when the organization anticipates and plan for the positive externalities. Over fishing in a place would increase the demand when the fish supplied to the market is less than the demand. The organizations can take care of this externality by anticipating the decrease in the supply and importing enough supply of fish for the consumer in the local market.

Rolls-Royce found out that its automobile business was not competitive and its jet engine market was booming. Rolls-Royce sold its automobile business and concentrated on leasing jet engines to the airline companies (Carpenter & Sanders, 2009). The leasing strategy made Rolls-Royce take larger share of the jet engine business (Carpenter & Sanders, 2009). Xerox had good innovations coming from its research center in Palo Alto, which could have been good competitive advantages. Innovations like personal computers, bit-mapped, desktop, icons, and the use of mouse and menus (Carpenter & Sanders, 2009; Rothkopf, 2000). Xerox did not use these competitive innovations and lost a good chance to be a leader in these markets (Carpenter & Sanders, 2009; Rothkopf, 2000).


Carpenter, M. A., & Sanders, W. G. (2009). Strategic management. Upper Saddle River, NJ: Pearson Prentice Hall.

DeGennaro, R. (2005). Market Imperfections. Journal of Financial Transformation, 14(2005), 107-117.

Ogrean, C., Herciu, M., & Belascu, L. (2009). Searching for sustainable competitive advantage– From tangibles to intangibles. Journal of US-China Public Administration, 6(4), 1-9.

Rothkopf, M. H. (2000). Under the Mike-R-Scope: What happened at Xerox PARC? Interfaces, 30(6), 91-94.

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PESTEL Analysis

PESTEL model is useful for leaders and managers to analyze the microeconomics of business environment they are working in or attempting to enter in the future. Strategist use PESTEL model to find the macro-environmental factors that can or will affect their strategy implementations and the organizational performance. PESTEL model include six environmental influencers, which are Political, Economic, Social, Technological, Environmental, and Legal. These influencers may look independent but they are related to each other in different ways. Change in the political situation may change the economical and the environmental regulations. The environmental standards may be relaxed which make the organizational investments unjustified, on the contrast, the environmental regulations may become more stringent which may need more investment in an approved project.

Political factors: governmental instability make the intended market undesirable because new government may revoke contracts or change social policies (Evans & Richardson, 2007). The unexpected changes may consume the intended profit margin. Tax policies and trade regulations, like NAFTA, are equally important political factors.

Economic factors include unemployment rate, buyers disposable income, and credit accessibility (Carpenter & Sanders, 2009). These three factors affect the individuals buying power. Strategist need to look at these factors along with interest rate and inflation before offering their products and services in the intended market.

Social Factors are lifestyles, educational levels, wealth distribution, and population demographics (Evans & Richardson, 2007). A product or service may be successful in a country or part of the country because of the lifestyle of that area but could be unsuccessful in another. Trendy cafes may be successful with the young population but gourmet coffee shops are more desirable for the older population.

Technological factors like innovations and discoveries can affect the pace of technological obsolescence (Carpenter & Sanders, 2009). The introduction of iPod in the market signaled the obsolescence of the Sony Walkman. The same situation can be noticed with the DVD use over VHS tapes and now the online rent services made the DVD lose market share fast. Digital and audio books affected the printed books heavily. Boarders, the bookshop chain, just announce its troubled operations and its intention to close more stores.

Environmental factors are increasing and becoming more stringent every year. Waste disposal, energy conservation, and protections laws are the most important factors but not all. Environmental laws keep on increasing the limits after the noticed global environmental changes. Managers and business leaders need to plan for more changes in the protection laws because of the constant demand from the environmental groups and the international environmental organizations.

Legal factors are changing constantly depending on the market needs, or government political views (Carpenter & Sanders, 2009; Evans & Richardson, 2007). Change in the employment regulations like minimum wage, discrimination laws, and health and safety regulations can affect the operational cost.

Managers and business leaders should expect the risk of the changes in the above factors. Well planned and risk managed strategy can decrease the cost and maybe signal good opportunities in the future.


Carpenter, M. A., & Sanders, W. G. (2009). Strategic management. Upper Saddle River, NJ: Pearson Prentice Hall.

Evans, C., & Richardson, M. (2007). Assessing the environment. Manager: British Journal of Administrative Management(60), i-iii.

Geo-economics Theory

International and subcultures issues had remarkable effect on the international organizations. Comparison of the popular theories like institutional, agency and resource-based theories test the chinese culture and geographic differences (Tsui, 2006). The geo-economics theory integrates the effect of economics and management on the success of the organization which competes in the international market and its geographical differences.

Study by Schlevogt (2001) tackled the differences between 124 organizations in the North of China and South of China found that “government support, organizational structure and management expertise” were the most important reasons for the effectiveness in North of China (Schlevogt, 2001).

Geo-economics differences are obvious in the Gulf Cooperation Council (GCC) area where the countries speak the same language, have same religion and similar heritage, but business and economic differences are obvious to the local and the international business community.


Schlevogt, K.-A. (2001). Institutional and organizational factors affecting effectiveness: Geo-economics comparison between. Asia Pacific Journal of Management, 18(4), 519.

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Minority networks of Japanese organizations have shares in the other organizations to create a larger network. The network collaborates to boost each other’s interest (Jones, 2007).
Financial Keiretsu link and group various companies which have their own large banks. The capital Keiretsu is used to manage input and output linkages between the small networks of organizations (Jones, 2007).
Toyota is using capital Keiretsu by owning as large as 40% share from the companies that supply it with inputs. With this share, Toyota is able to exercise good control on its resources (Jones, 2007). The Fuyo Keritsu is a financial Keiretus that has Hitachi, Nissan, Canon and many other companies joined by Fuji bank which provide the financial services to the group.
Just In Time (JIT) principle is part of the Keiretsu theory where companies depend on receiving the needed parts just in time for their use from a supplier that produce the right amount for the user. Keiretsu enabled Toyota to have the strong relation with its suppliers without the cost of owning and managing them. General Motors (GM) has full ownership of its suppliers than any other carmaker which made GM incur the cost of the supplier while the supplier running inefficient operations knowing that GM will buy their products regardless of their business efficiency.
Ford the car manufacturer formed its Keiretsu by owning minor share in its engine supplier, windows producers, body parts and wheels manufacturer. Ford also had notable ownership in the car rental company Hertz which use Ford’s cars only (Jones, 2007).

Skilled Workers Vs. Cheap Labor

Listen to this postInternational producers, like China, are exporting  their products to sell them at or lower than the production cost (Vandenbussche & Zanardi, 2008). Local companies can compete with the low-cost labor by making the costly labor more efficient to produce the same product in less time and with less waste (time and material). Klempa (2006) states that productivity can be drastically improved when the roadblocks are removed. Productivity improve by improving management planning, making productivity a strategic initiative, aiming high, measuring progress and making changes as needed (Klempa, 2006). The same worker might cost more but he or she would produce high output with less reworks. Local business would face stiff competition from the international producers if the same quality could be produced with cheaper labor.


Klempa, M. (2006). Eliminating productivity roadblocks. Financial Executive, 22(8), 32-35.

Vandenbussche, H., & Zanardi, M. (2008). What explains the proliferation of antidumping laws? Economic Policy, 23(53), 93-138. doi: 10.1111/j.1468-0327.2007.00196.x

Is NAFTA Working Well?

North American Free Trade Agreement (NAFTA) is an agreement signed by Canada, Mexico and the United States in 1994. Good argument was against NAFTA which suggested  that low wages in Mexico would reduce the wages in the U.S. and that the capital would flow from the U.S. to Mexico (Hymson, Blakenship, & Daboub, 2009). Another argument state that the free trade would not increase Mexico’s wages, and as result, high skill jobs would migrate to the U.S. (Hymson, et al., 2009).  Hymson et al. (2009) research found out that NAFTA agreement increased trade between Canada, U.S. and Mexico and the agreement was able to reduce processes and did not affect employment as feared by both countries. Alvarado (2008) confirm the same findings and state that the reason for Mexico’s poverty is because of the concentration of land and the distribution of small and unprofitable agriculture land to the farmers.


Alvarado, E. (2008). Poverty and Inequality in Mexico after NAFTA: Challenges, Setbacks and Implications. Estudios Fronterizos, 9(17), 73-105.

Hymson, E., Blakenship, D., & Daboub, A. (2009). Increasing benefits and reducing harm caused by the north american free trade agreement. Southern Law Journal, 19, 219-243.

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