1) “Blockbuster Video Stores is a good example of a company that could not engage in
transformational change”.
Answer:
Blockbuster video faced a dramatic change in its external environment as people stop
renting DVDs from stores in favour or online streaming (like Netflix, iTunes...) or mail-
order DVD rental (e.g. Netflix in the US).
So the forces for change are mainly technological (online streaming, downloading) and
competitive (mail-order DVD rental), though students can explore other forces (societal,
global, economic?) as long as their arguments are sound.
When customers stop using your product/service because of new technology or
competitive substitutes, the organization needs to re-invent itself completely in order to
adapt. This is certainly a form of transformational change since it requires a significant
change in the firm's strategy and structure (change from a brick-and-mortar business to
online or mail-order) that entails changing the organizational culture, mindset... The other
alternative for Blockbuster is to remain a brick-and-mortar organization but change their
strategy from DVD rental to some other retail business (coffee shop?) - also a significant
transformational change. Developmental changes are small incremental changes that
simply require firms to the same thing better, more efficiently... while using the same
organizational strategy and structure.
The key issue is why it's difficult to implement transformational change: The reasons
why organizations resist change are discussed briefly on p.475-478 and include
institutionalization, bureaucracies and roles, cognitive scripts. Eg. Can discuss how
organizations develop routines and processes that make them reliable and accountable to
external stakeholders but that these routines and processes become embedded in the
organization's structure and make it more difficult to change and inert. Transformational
changes are the most difficult ones since they require radical and significant changes to
organizational structures, strategies, culture... Organizations have great difficulty
changing because they are rewarded for delivering reliable and consistent results. In order
to become reliable and accountable to their stakeholders, organizations develop these
reproducible routines and bureaucratic procedures that allow them to deliver stable and
consistent outcomes. Changing these routines and procedures is very disruptive to
organizations since they lose the reliability and accountability that stakeholders require. If
stakeholders withhold their support because of the uncertainty and instability surrounding
the organization, it will likely fail. Transformational changes are therefore very
disruptive, costly and rarely successful.
Students may also discuss bureaucracies, institutionalization, cognitive scripts as factors
making organizations more resistant to change. Assess how well they explain the theories
(or use an alternate but equally valid theory) and apply them to the Blockbuster case. The
Test Bank for Karakowsky and Guriel, The Context of Business, 1e
Copyright © 2015 Pearson Canada Inc. 1
transformational change”.
Answer:
Blockbuster video faced a dramatic change in its external environment as people stop
renting DVDs from stores in favour or online streaming (like Netflix, iTunes...) or mail-
order DVD rental (e.g. Netflix in the US).
So the forces for change are mainly technological (online streaming, downloading) and
competitive (mail-order DVD rental), though students can explore other forces (societal,
global, economic?) as long as their arguments are sound.
When customers stop using your product/service because of new technology or
competitive substitutes, the organization needs to re-invent itself completely in order to
adapt. This is certainly a form of transformational change since it requires a significant
change in the firm's strategy and structure (change from a brick-and-mortar business to
online or mail-order) that entails changing the organizational culture, mindset... The other
alternative for Blockbuster is to remain a brick-and-mortar organization but change their
strategy from DVD rental to some other retail business (coffee shop?) - also a significant
transformational change. Developmental changes are small incremental changes that
simply require firms to the same thing better, more efficiently... while using the same
organizational strategy and structure.
The key issue is why it's difficult to implement transformational change: The reasons
why organizations resist change are discussed briefly on p.475-478 and include
institutionalization, bureaucracies and roles, cognitive scripts. Eg. Can discuss how
organizations develop routines and processes that make them reliable and accountable to
external stakeholders but that these routines and processes become embedded in the
organization's structure and make it more difficult to change and inert. Transformational
changes are the most difficult ones since they require radical and significant changes to
organizational structures, strategies, culture... Organizations have great difficulty
changing because they are rewarded for delivering reliable and consistent results. In order
to become reliable and accountable to their stakeholders, organizations develop these
reproducible routines and bureaucratic procedures that allow them to deliver stable and
consistent outcomes. Changing these routines and procedures is very disruptive to
organizations since they lose the reliability and accountability that stakeholders require. If
stakeholders withhold their support because of the uncertainty and instability surrounding
the organization, it will likely fail. Transformational changes are therefore very
disruptive, costly and rarely successful.
Students may also discuss bureaucracies, institutionalization, cognitive scripts as factors
making organizations more resistant to change. Assess how well they explain the theories
(or use an alternate but equally valid theory) and apply them to the Blockbuster case. The
Test Bank for Karakowsky and Guriel, The Context of Business, 1e
Copyright © 2015 Pearson Canada Inc. 1
