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Evaluate these two options and recommend which option might be preferred by Morrisons’ shareholders - Edexcel - A-Level Business - Question 1 - 2017 - Paper 2
Question 1
Evaluate these two options and recommend which option might be preferred by Morrisons’ shareholders. Morrisons’ improved performance Morrisons’ revenue and share pr... show full transcript
Worked Solution & Example Answer:Evaluate these two options and recommend which option might be preferred by Morrisons’ shareholders - Edexcel - A-Level Business - Question 1 - 2017 - Paper 2
Step 1
Transformational leadership is the ability to implement a vision through radical policies and strategies to bring about a positive change.
Answer
David Potts’ transformational leadership may have resulted in a series of positive changes at Morrisons. By replacing several directors, he could usher in new ideas, such as the 'I’m cheaper' campaign, which swiftly aligns with market demands and enhances competitiveness. Previous resistance from earlier directors may have hindered his vision, creating obstacles in the implementation of strategies necessary for growth.
Moreover, selling off 140 convenience stores could streamline operations, allowing the business to focus on core supermarkets. This shift could be crucial for improving the performance of its key assets under Potts’ direction, thus potentially yielding positive financial results.
Despite these positive changes, it is essential to consider the factors contributing to improved performance. An increase in consumer confidence might lead consumers to increase their spending at Morrisons, contributing to a 0.6% revenue increase. Additionally, lower energy costs and increased disposable income from reduced interest rates could result in higher grocery spending, complicating the assessment of Potts' direct impact. Therefore, while Potts' leadership is pivotal, it could be too early to determine its full effects on Morrisons' recovery and success.
Step 2
Evaluate which option might be preferred by Morrisons’ shareholders.
Answer
Shareholders typically favor strategies that enhance profitability and long-term growth. In this context, the transformational leadership under Potts that introduces innovative strategies may appeal to shareholders looking for a turnaround in the company's fortunes. The evidence of increasing revenue and share price supports this.
However, it is crucial to acknowledge external economic factors. Consumer confidence boosts alongside Potts' initiatives could signify a positive trend, leading shareholders to prefer the continued implementation of transformational leadership strategies.
Ultimately, shareholders may lean towards Potts' leadership as it signifies a proactive approach to address the challenges Morrisons faces, cultivating an environment that may lead to sustained growth, provided it translates to concrete financial performance and customer satisfaction.