U3.19 — Reasons for Resistance to Change
Overview
Dotpoint 19: reasons for resistance to change, including financial costs, managerial inertia, cultural incompatibility in mergers/takeovers and staff attitude.
Businesses operating in a global environment often need to change. They may need to enter new markets, adopt new technology, merge with overseas businesses, restructure their workforce or respond to stronger global competition.
However, change is not always accepted easily. Resistance to change occurs when managers, employees or other stakeholders oppose, delay or avoid changes that the business is trying to introduce.
This dotpoint focuses on four key reasons for resistance to change:
- financial costs
- managerial inertia
- cultural incompatibility in mergers/takeovers
- staff attitude
🌏 What is change in a global environment?
Change in a global environment refers to the adjustments a business makes to its goals, structure, operations, people, technology, products or strategies so it can respond to global opportunities, threats and competitive pressures.
Ways a business can change in a global environment
- entering a new overseas market
- opening an international office or head office
- forming a strategic alliance with an overseas business
- merging with, or taking over, another business
- introducing e-commerce or online sales channels
- adopting new technology or automated systems
- changing products to suit different cultures or customer needs
- outsourcing or offshoring parts of operations
- changing suppliers, distribution channels or logistics systems
💸 Financial costs
Financial costs refer to the money a business must spend to plan, introduce and support change. These costs may include new equipment, staff training, consultants, redundancies, relocation, system upgrades, marketing, legal advice and temporary disruption to normal operations.
Why financial costs create resistance to change
Financial costs can create resistance because change often requires spending money before the business receives the benefits. Managers may be concerned that the change will reduce profit, place pressure on cash flow or fail to generate a strong return on investment.
Employees may also resist change if they believe cost-cutting will lead to job losses, reduced hours, fewer benefits or increased workloads. This is common during restructures, mergers, automation projects and international expansion.
In a global environment, financial costs can be even higher because businesses may need to comply with overseas laws, train employees in different countries, adjust supply chains or adapt products and systems for international markets.
How financial costs can create resistance
High upfront investment
Change often requires large spending before any benefits are received. A business may need to purchase new technology, redesign stores, upgrade systems, relocate offices or invest in overseas operations.
This can make managers cautious because the change may reduce short-term profit and increase financial risk.
Training and support costs
Employees may need training before they can use new systems, follow new procedures or work effectively in a global business environment.
Training can be expensive because it may require paid time away from normal work, specialist trainers, travel, online learning platforms and ongoing support.
Redundancy and restructuring costs
Change may involve restructuring departments, removing duplicated roles or changing job responsibilities. This can create redundancy costs, recruitment costs and legal obligations.
Employees may resist if they believe the change is mainly designed to reduce staff numbers or cut wages.
Uncertain return on investment
Managers may resist change if they are not convinced the financial benefits will be greater than the cost. This is especially likely when the change is complex, risky or difficult to measure.
For example, expanding into a new global market may increase sales, but it may also involve marketing costs, legal fees, product adaptation and new distribution costs.
Australian case study — Coles and automated fulfilment/distribution centres
Coles provides an Australian example of how financial costs can be connected to major organisational change. Coles has invested heavily in automated distribution and customer fulfilment centres to improve online grocery service and supply chain efficiency.
This type of change can create resistance because it involves significant upfront spending, new technology, altered work processes and staff training. Employees may also worry about how automation will affect existing warehouse, delivery and store-based roles.
This shows why financial costs can slow down or complicate change, even when the business believes the change is necessary for long-term efficiency and competitiveness.
Example of how to write this factor in an exam
Financial costs can cause resistance to change because the business may need to spend money before it receives any benefits. For example, Coles’ investment in automated fulfilment and distribution centres requires spending on technology, facilities, training and changed work processes. Managers may be cautious if they believe these costs will reduce short-term profits or create financial risk. As a result, financial costs can delay change because the business may be uncertain whether the long-term efficiency benefits will justify the investment.
🧊 Managerial inertia
Managerial inertia occurs when managers resist change because they are comfortable with existing practices and are reluctant to alter the way the business operates.
Why managerial inertia creates resistance to change
Managerial inertia can create resistance because managers may prefer familiar systems, routines and decision-making methods. They may believe the current way of operating is still effective, even when the external environment has changed.
Managers may also resist change because they fear losing authority, status or control. If a new system requires different skills or makes old management practices less useful, some managers may avoid or delay the change.
In a globalised world, managerial inertia is risky because markets, technology and customer expectations can change quickly. Businesses that keep using outdated practices may lose customers, become less efficient or fall behind international competitors.
How managerial inertia can create resistance
Comfort with existing routines
Managers may resist change because existing routines feel familiar and safe. They may believe that because the old approach worked in the past, it should continue to work in the future.
This can be dangerous when global markets change quickly and the business needs to adapt.
Fear of losing control
Change may reduce a manager’s control over decisions, information or employees. For example, digital systems can make performance data more visible and reduce reliance on traditional management judgement.
A manager may resist if they feel their authority or influence is being reduced.
Lack of confidence with new skills
Managers may resist change if they do not feel confident using new technology, managing diverse teams or operating in international markets.
Instead of admitting this skill gap, they may delay the change or argue that the current system is good enough.
Short-term thinking
Some managers may focus on short-term disruption rather than long-term benefits. They may resist change because it creates extra work, temporary confusion or short-term financial pressure.
This can prevent the business from making changes needed for future growth.
Australian case study — Myer and the need to modernise retail systems
Myer provides an Australian retail example of why managerial inertia can be risky. Traditional department-store retail has faced pressure from online shopping, changing customer behaviour and the need for improved digital systems.
If managers remain too attached to old store-based systems and slow decision-making, they may resist investment in e-commerce, digital communication, stock systems and customer data. This can make the business slower to respond to changing retail conditions.
This shows how managerial inertia can cause resistance when leaders are reluctant to move away from familiar business models, even when the market is clearly changing.
Example of how to write this factor in an exam
Managerial inertia can cause resistance to change because managers may prefer existing routines and be reluctant to adopt new ways of operating. For example, a manager in a traditional retail business may resist investment in e-commerce because they are more comfortable with physical stores and face-to-face selling. If customers increasingly shop online, that manager’s reluctance can slow the business’s response to the market. As a result, managerial inertia can make a business less competitive in an increasingly global and technology-driven environment.
🤝 Cultural incompatibility in mergers/takeovers
Cultural incompatibility occurs when two businesses have different values, expectations, communication styles, leadership approaches or ways of working. In mergers and takeovers, this can create resistance because employees and managers may struggle to work together under a shared structure.
Why cultural incompatibility creates resistance to change
Cultural incompatibility can create resistance because mergers and takeovers often force people from different organisations to work together. Each business may have its own leadership style, employee expectations, customer service standards and decision-making processes.
In global mergers and takeovers, cultural differences may be even stronger because businesses may operate in different countries, languages and legal environments. Employees may resist if they feel the new culture does not respect their previous workplace identity or local ways of working.
If cultural incompatibility is not managed carefully, the merged business may experience conflict, poor communication, reduced morale and lower productivity.
How cultural incompatibility can create resistance
Different leadership styles
One business may have a direct, top-down leadership style while another may expect consultation and shared decision-making.
Employees may resist if they believe the new leadership style is disrespectful, confusing or inconsistent with the way they are used to working.
Different communication norms
Businesses may communicate in different ways. Some may prefer formal meetings and written procedures, while others may rely on informal conversations and quick decisions.
In global mergers or takeovers, language barriers and different cultural expectations can make communication more difficult.
Different employee expectations
Employees may have different expectations about hours, leave, pay, promotion, training, consultation and workplace behaviour.
If employees believe the merger or takeover will reduce their conditions or change their workplace identity, they may resist the change.
Different customer and market understanding
A business entering another country may misunderstand local customer preferences and workplace practices.
This can create resistance if local employees believe the new owner is ignoring important cultural knowledge about customers and the market.
Australian case study — Wesfarmers, Bunnings and Homebase
Wesfarmers’ takeover of the UK retailer Homebase is a strong Australian example of how cultural and market incompatibility can affect change. Wesfarmers acquired Homebase in 2016 with the aim of applying the Bunnings model in the United Kingdom and Ireland, but later agreed to divest the business.
The case highlights how a successful Australian business model may not transfer smoothly into a different market. Differences in customer expectations, store formats, product ranges, staff practices and local retail culture can make change difficult after a takeover.
This shows why cultural incompatibility can create resistance and reduce the success of change when businesses merge with or take over organisations in different countries.
Example of how to write this factor in an exam
Cultural incompatibility can cause resistance to change in mergers and takeovers because employees from the two businesses may have different values, expectations and ways of working. For example, when Wesfarmers attempted to apply the Bunnings model to Homebase in the UK, differences in customer expectations and retail culture made the change difficult. Employees and managers may resist if they believe the new approach does not suit the local market or ignores existing workplace practices. As a result, cultural incompatibility can reduce cooperation and make the takeover less successful.
👥 Staff attitude
Staff attitude refers to the feelings, beliefs and reactions employees have towards a proposed change. Employees may support change if they understand it and believe it is fair, but they may resist if they feel uncertain, threatened or excluded.
Why staff attitude creates resistance to change
Staff attitude can create resistance because employees are directly affected by changes to roles, routines, management structures, locations, technology, pay, conditions and workplace culture.
Employees may resist if they fear job losses, increased workloads, loss of status, reduced entitlements, poor communication or a lack of training. Resistance may appear as complaints, low morale, arguments, absenteeism, lower productivity or refusal to cooperate.
In a global environment, staff attitude is especially important because employees may need to adapt to new cultures, travel requirements, international teams and different communication expectations.
How staff attitude can create resistance
Fear of job losses
Employees may resist change if they believe new systems, mergers, restructuring or overseas expansion will remove jobs or reduce hours.
This can lead to anxiety and lower trust in management.
Fear of losing status or opportunity
Employees may resist if they believe the change will reduce their authority, promotion chances or influence within the business.
This is common when new roles are created or when junior staff are given leadership opportunities.
Uncertainty and poor communication
Employees are more likely to resist when they do not understand why change is happening, how it will affect them or what support will be provided.
Rumours can spread quickly when managers fail to communicate clearly.
Lack of training and confidence
Employees may resist if they feel unprepared for new duties, new technology, new locations or new cultural expectations.
Training and support can reduce resistance by helping staff feel more capable and secure.
Concern about workplace culture
Employees may resist if they believe the change will damage a positive workplace culture or make the business less fair, supportive or familiar.
This is especially important in businesses that pride themselves on strong staff relationships.
Australian case study — Commonwealth Bank and return-to-office resistance
Commonwealth Bank provides an Australian example of staff attitude affecting change. When the bank required staff to spend part of their working time back in the office, some employees and the Finance Sector Union pushed back against the change.
The resistance was linked to employee concerns about flexibility, commuting, family routines and whether management had the right to impose the new work arrangement. This shows that even when managers believe a change will improve collaboration, staff may resist if they believe it reduces flexibility or is being introduced unfairly.
This case shows why staff attitude must be managed carefully through clear communication, consultation and support.
Example of how to write this factor in an exam
Staff attitude can cause resistance to change because employees may feel uncertain or threatened by changes to their roles, routines or opportunities. For example, if a bank requires employees to return to the office more often after a period of flexible work, some staff may feel frustrated about commuting, family routines and reduced flexibility. If staff believe the change is unfair or poorly explained, they may become less willing to cooperate. As a result, negative staff attitudes can reduce morale and make the change harder to implement successfully.
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Biz Fact: Blockbuster continued relying heavily on physical stores while Netflix moved towards streaming, making it one of the best-known examples of managerial inertia.
Past Exam Questions
Use these past exam questions to practise applying the four reasons for resistance to change: financial costs, managerial inertia, cultural incompatibility and staff attitude.
Section 1 Questions
2016 — Section 1 — Question 5(d) — 4 marks
Context
Question 5 focuses on businesses operating in an increasingly globalised world and includes e-commerce, technology, financial risk and resistance to change.
Question: Explain why managerial inertia may be a reason for resistance to change in an increasingly globalised world. Provide an example that relates to the increasing reliance on technology in business. (4 marks)
Command term focus: Explain
Explain requires cause and effect. Define managerial inertia, show why it creates resistance, and include a technology-related example.
See the full command term guide here: Command Terms.
Sample answer
Managerial inertia occurs when managers resist change because they are comfortable with existing practices and do not want to alter the way the business operates.
In an increasingly globalised world, this can create resistance because managers may be reluctant to adopt new technology, online selling systems or global communication tools. For example, a manager in a traditional retail business may resist e-commerce because they are used to physical stores and face-to-face customer service. If the business does not adopt online sales technology, it may lose customers to global competitors that are easier to access. As a result, managerial inertia can prevent a business from keeping up with technology-driven change.
2019 — Section 1 — Question 5(a) — 4 marks
Context
Sersee Designs is an interior design business operating in a global market. It is undergoing organisational change, including a recent leadership restructure, and is experiencing some resistance to change from its employees.
Question: Outline two reasons for resistance to change. (4 marks)
One:
Two:
Command term focus: Outline
Outline requires the main features. For this question, briefly identify and describe two reasons employees may resist change.
See the full command term guide here: Command Terms.
Sample answer
One: One reason for resistance is staff attitude. Employees at Sersee Designs may feel uncertain or frustrated about the leadership restructure if they do not understand why it is happening or how it will affect their roles.
Two: A second reason is financial costs. The business may need to spend money on new managers, training, consultants or changed systems. Employees may resist if they believe these costs could lead to job cuts, higher workloads or fewer resources.
Section 2 Questions
2017 — Section 2 — Question 8(b) — 4 marks
Case study / context
During his high school years, Bob worked in his dad’s specialty camera store, developing film and selling cameras and equipment after school. Bob took a couple of gap years and travelled the world, noticing the variety of photographic equipment people used. He also noticed the range of accessories people had purchased, such as camera covers, bags and selfie sticks.
Now back home, Bob’s ambition is to work with his dad to modernise and manage the camera shop once he graduates from the local university. Bob is trying to encourage his dad to embrace new digital technology by changing his current practices to modern digital camera practices and embracing the digital age.
Bob thinks an e-commerce platform would help move the ‘old’ cameras to collectors worldwide. Operationally, this would provide more space to stock digital products for customer sales in the shop. As well, the online presence would provide opportunities to develop electronic sales. However, his dad is resisting any change to the digital age and, as a result, sales are down and the shelves are full of outdated cameras and equipment.
Prepare a short report or essay for Bob and his dad addressing the following points:
Question: Outline two reasons why Bob’s dad may be resistant to change. (4 marks)
Command term focus: Outline
Outline requires the main features. For this question, identify two reasons and briefly link each reason to Bob’s dad’s camera shop.
See the full command term guide here: Command Terms.
Sample answer
One: Bob’s dad may resist change because of managerial inertia. He is used to traditional film development and selling cameras in a physical store, so he may be reluctant to change to digital camera practices and e-commerce.
Two: Bob’s dad may also resist because of financial costs. Introducing an e-commerce platform may require spending money on website development, online payment systems, product photography, staff training and digital marketing. This may worry him because sales are already down.
2020 — Section 2 — Question 8(b) — 6 marks
Case study / context
Joho and Pez are entrepreneurs and partners in a successful broadcast media business, specialising in the production of podcasts. Beginning as a small independent outlet with a handful of programs made in-house, it has now grown to be a business with more than 20 employees.
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By entering into a global strategic alliance, Joho and Pez will continue to grow their business. It will provide the opportunity to increase profits and gain access to more resources, expertise and funding. There is also potential in a global strategic alliance to have access to a diverse labour force and reduce marketing, research and development costs.
In a global strategic alliance, Joho and Pez and their employees will need to respond to different communication protocols, ethical practices, cultural beliefs and levels of education. It is anticipated that the workplace will be far more diverse in a global strategic alliance.
Joho and Pez are acutely aware of how any change to the structure of their business will have an impact on their employees. They pride themselves on maintaining a positive staff culture and seek to continually improve the work environment. They are aware staff may be resistant to the change at first; therefore, Joho and Pez will need to provide structure, information and guidance to prepare their employees for this change.
Referring to the source information and your own knowledge, prepare a report or essay in which you answer the question parts below.
Question: Explain how cultural incompatibility and staff attitudes in mergers/takeovers could have an impact on the success of a global strategic alliance. (6 marks)
Command term focus: Explain
Explain requires cause and effect. Explain both cultural incompatibility and staff attitudes, and link them to the global strategic alliance.
See the full command term guide here: Command Terms.
Sample answer
Cultural incompatibility could impact the success of the global strategic alliance because Joho and Pez’s employees will need to work with people who may have different communication protocols, ethical practices, cultural beliefs and levels of education. If these differences are not managed carefully, employees may misunderstand each other or find it difficult to cooperate. As a result, cultural incompatibility could reduce trust, slow decision-making and make the alliance less successful.
Staff attitudes could also impact success because Joho and Pez’s employees may feel uncertain about changes to the structure of the business. The case states that Joho and Pez pride themselves on maintaining a positive staff culture, so employees may resist if they believe the alliance will damage that culture or make the workplace less familiar. If staff are negative or anxious, productivity and cooperation may fall. As a result, staff attitudes could affect whether the global strategic alliance is accepted and implemented successfully.
2021 — Section 2 — Question 6(c) — 6 marks
Case study / context
Laffitaya is an Australian business that produces high-end hiking and camping clothing. The clothing offers protection from all weather elements that hikers may encounter. It offers insulation, breathable technology, waterproof performance and is lightweight for all hiking and camping conditions. The manufacturing process of the clothing is labour intensive to ensure the garments meet the quality controls of Laffitaya’s management.
The Chief Executive Officer (CEO) of Laffitaya, Quinn, is looking to expand into the Asian market by merging with a Singaporean outdoor supplies business, ExDex Outdoors. The news of the merger has caused many employees in both businesses to be nervous, as they have heard rumours about potential job losses, leadership restructuring and changes to policy in relation to leave entitlements and daily procedures. There has also been talk of increased financial costs associated with the merger, which is creating concern among employees.
Harrison, the operations manager at Laffitaya, is travelling to Singapore to meet with the team at ExDex Outdoors to implement the processes that are used in Australia to ensure the highest standards are maintained in the production of the clothing. Harrison is very efficient and always meets quality control targets. He is also known for his direct nature and tends to talk down to staff, making decisions alone rather than having open communication with his team.
Laffitaya’s CEO, Quinn, is concerned that Harrison may not be aware of cultural considerations required to conduct successful business negotiations in Singapore. Quinn has therefore organised a meeting with Harrison to discuss potential communication strategies to ensure that the best outcome for Laffitaya is achieved.
Referring to the case study and your own knowledge, prepare a report or essay in which you answer the questions below.
Question: Explain how managerial inertia and financial costs could cause resistance to the change within Laffitaya. (6 marks)
Command term focus: Explain
Explain requires cause and effect. Explain how managerial inertia and financial costs could each cause resistance within Laffitaya.
See the full command term guide here: Command Terms.
Sample answer
Managerial inertia could cause resistance to change within Laffitaya because Harrison appears comfortable with his current management style and production processes. He is described as efficient and used to making decisions alone, but he also talks down to staff and may not be aware of cultural considerations in Singapore. If Harrison insists on applying Australian processes without adapting to ExDex Outdoors, he may resist the communication and cultural changes needed for the merger. As a result, managerial inertia could reduce cooperation and make the merger harder to implement successfully.
Financial costs could also cause resistance because employees have heard talk of increased costs associated with the merger. These costs may include travel, training, legal advice, leadership restructuring, changed procedures and possible redundancies. If employees believe these costs could lead to job losses or reduced entitlements, they may become nervous and less willing to support the change. As a result, financial costs could create uncertainty and resistance among employees in both businesses.
2023 — Section 2 — Question 9(b) — 5 marks
Case study / context
Wendy is the CEO of an Australian-owned hotel chain, Wunderers’ Hotels Pty Ltd, that has been operating for 25 years. Wendy has hotels in Australia and the Asia-Pacific area. The hotels have a strong loyalty rewards program, with over 50,000 members. Their goal in the next five years is to double their membership base and increase sales now that international regulations and legislation have decreased between countries. Wendy has seen an increase in room bookings in the last six months and believes people now have the confidence to travel once again internationally. Another accrediting factor to increased sales is due to popular events being rescheduled, such as the Australian Open and the Formula 1 Grand Prix.
Wunderers’ Hotels’ head office is in Melbourne. However, Wendy would like to move the office to the Asia Pacific region. This would allow her to focus on increasing memberships and customer service within that region and enable the hotel to be recognised as an international hotel chain. Wendy has chosen to establish the new head office in Singapore.
Currently, Wendy has 40 employees working in the Melbourne office in a range of roles in accounting, strategic business development, marketing, sales and human resource management. To train new employees in the Singapore office, she has requested a team member from each department to apply for a new role: Training and Development Coordinator. This will involve travel to Singapore four times a year. The role is an opportunity for leadership within the company and comes with an increase in salary and an annual bonus. Everyone within each team can apply if interested, no matter how long they have worked for the organisation or their experience. One of her main reasons for this is to create a team of leaders with diversity. Wendy strongly believes diversity within teams is a driving force for change and growth.
Some more experienced employees within the company have expressed disappointment and frustration that junior members of staff can apply for this promotional position. This has created arguments within the teams. Some staff members are also unhappy with the change of head office to Singapore. Implementing change within a business can be difficult and it is often met with resistance, so Wendy is keen to use Kotter’s 8 Steps to implement her changes successfully.
Refer to the case study and your own knowledge to answer the questions below.
Question: Describe the term ‘managerial inertia’ and explain why it has become a reason for resistance to change in Wendy’s organisation. (5 marks)
Command term focus: Describe and explain
Describe requires the meaning and main features of managerial inertia. Explain requires cause and effect, showing why it has become a reason for resistance in Wendy’s organisation.
See the full command term guide here: Command Terms.
Sample answer
Managerial inertia occurs when managers resist change because they are comfortable with existing practices and do not want to alter the way the business operates. It often involves a preference for familiar routines, existing power structures and old decision-making methods.
Managerial inertia has become a reason for resistance in Wendy’s organisation because some experienced employees are disappointed and frustrated that junior staff can apply for the Training and Development Coordinator role. These employees may be used to promotion based on experience or seniority, so Wendy’s more open approach to leadership and diversity challenges the existing culture. Some staff are also unhappy with the head office moving to Singapore, which may threaten familiar routines and existing management structures. As a result, managerial inertia could create resistance because some employees and managers may prefer the old way of operating rather than Wendy’s new international direction.