IB Business Management HL 2.1.3 Resistance to Change Questions

Initially, the MiniC compressor was sold only in ELE’s gasoline station stores, but Lucas realized another distribution channel was needed. Within a year, the MiniC was on sale in thousands of retail outlets across the EU. Gasoline station retail stores were later refurbished, floor space increased, and point-of-sale stock management software installed. In 2010, ELE set up a car rental business financed by retained profits and external finance. Giselle wanted to grow the division. Car rentals could be booked online, over the telephone and face to face at counters in gasoline stations or airports. ELE was considering launching a smartphone booking app. The car rental division adopted graduate recruitment and annual training. Giselle encouraged internal recruitment and wanted employees with ambition and initiative, employees who shared her belief in embracing change, and internal promotion when management vacancies arose. The gasoline station compressor market is saturated but consistently profitable. The Zeat factory will not require additional investment for another five years. Sales of the MiniC were consistent despite increased competition from cheap imports. Gasoline station revenues face the challenge of declining gasoline sales as governments and car companies move away from gasoline and diesel cars. Giselle’s presentation highlighted that most car rental businesses in India are small and local, own 20–50 cars and operate in only one or two cities. Only 4 % of cars on roads were rental cars, foreign and domestic tourism was growing, urbanization was rapid and public transportation was basic but cheap. Monica recommended a fundamental change to the European car rental division: to gain first-mover advantage, she wanted to launch a new technology-enhanced brand, In3T. All cars would be electrically powered, customers would sign up as members, membership would be free, and members would book and locate cars using a smartphone app. Cars would be hired by the hour and could be left at designated city locations. The service would have few overheads and no booking offices.

In 2010, ELE owned 4.5 % of the European Union (EU) car rental market. In 2019, ELE's car rental division had revenues of EUR 0.9 billion in a market worth EUR 16.8 billion. Initially, ELE only provided car rentals in its gasoline stations in Belgium. By 2014, ELE had expanded the service to its stations in France, Spain and the UK.

In 2016, Giselle also reorganized ELE's car rental offices so that each office operated as a profit centre. An entrepreneurial approach was adopted. Office teams received substantial bonuses if they exceeded profit targets, but only offices that met their targets qualified for these bonuses. These targets were set, without consultation, by Giselle. Over a five-year period, targets were met by 85 % of offices. Giselle's reorganization was not welcomed by employees.

In 2021, Monica recommended that ELE trial the business model she had proposed for the new In3T brand in two major cities in the EU for one year: if successful, the brand and its model could then be launched in all major cities in the EU. Monica said, "We must do it. I'm convinced that our rivals will adopt this business model within two years. If we don't act now, we will be left behind and our rivals will beat us to it."

Giselle, however, disagreed strongly. She had built the car rental division from its inception. She believed high levels of customer service and well-trained staff were two reasons why the car rental division remained successful. She was also unhappy with the EUR 100 million cost and payback of three years.

Explain two reasons why ELE's employees may have resisted the reorganization implemented by Giselle.