CHANGE MANAGEMENT

PMS 3293

WHY ORGANIZATIONS CHANGE

Public change rationales

Prepared for:
Mdm. Norjiah binti Muslim

Prepared by:
Danish Wafi bin Abdul Haris

4141005811

TABLE OF CONTENTS
1. THE RATIONALES FOR CHANGE ............................................................................ 1
2.

COMPARISON BETWEEN RATIONALES FOR CHANGE ....................................... 4

3.

SINGLE VERSUS MULTIPLE RATIONALES ............................................................ 5

I.

ARTICLES ..................................................................................................................... I

II.

REFERENCES ......................................................................................................... VI

Bibliography ....................................................................................................................... VI

1. THE RATIONALES FOR CHANGE

1.1.Petronas to allocate RM2.1 billion yearly for Sarawak contractors1
(refer to article I)
According to the article titled as the above, it was said that a minimum of RM2.1
billion are to be allocated yearly on several terms that have been agreed upon by
Petronas and the state government of Sarawak in lieu to the demand by the people
of Sarawak and the federal government for more royalties for the state.
By probing this article, we could see that the rationale, of sudden change of
Petronas, famous for their track record on being penny-pinching towards the
state they benefitted from, were because of several pressures that had been applied
towards them, more likely to be external pressures/ environmental pressures for
change.
Environmental pressures are one focus for explaining change2 the quote stated
here are meant to justify the classes of the pressures that help us to manage, and
understand how is the change occurs from the articles.
From the articles, we are able to deduce, the environmental pressures for change
for Petronas to implement the act of allocate a minimum of RM2.1 billion yearly
for Sarawak contractors, are due to mandated pressures and reputation and
credibility pressures.
The essence of the article itself able to explain why mandated pressures is
involved. The article discusses that, several political figures representing the state
from both Barisan Nasional and the opposition Pakatan Rakyat are both agreed for
this outcome from the negotiation. Not only the RM2.1 billion deal is achieved,
now Petronas will give more share of subsidiary companies to Sarawak based
contractors rather than peninsular based contractors. This petition have open the
doors of improvement towards Sarawak, as Petronas now are deemed to follow
the agreement after decades of poor deal.
Reputation and credibility pressures is rationalised when, Petronas, a multi-billion
dollar company failed to give the royalties the people of Sarawak deserves for
decades that is only 5%.

1
2

(Ji, 2015)
(Palmer, Dunford, & Akin, 2009)

1.2.Kalashnikov turns sights back on military markets to beat sanctions CEO3

(refer to article II)
Kalashnikov, a firearm maker are now is undergoing several changes in the
company due to the Western sanctions that have been imposed upon them a
Russian company due to the Russia/Ukraine conflict that have resulted in severe
market decline for their products, mainly because of non-existent market in the
United States that had gave them double the sales.
From the article, the rationales for Kalashnikov for undergoing changes are due to
market sanctions, which result in market decline, as well as unrest inside the
company due to this matters. The conflict between Russia and Ukraine had been
going on for a long time and Kalashnikov, a Russian firearm maker, have been
providing both sides with firearm and therefore making the matters more difficult
to solve due to bloody battle that are going on every single day.
Pressures that falls upon Kalashnikov are in form of both environmental pressures
as well as organizational pressures for change. Both external and internal factors
are forcing them to change their game so that they are able to survive as an
organization and gain back what they have loss. The pressures involved are
mandated pressures, geopolitical pressures, market-decline pressures, and
power and political pressures.
Russia/Ukraine conflict gave Kalashnikov more sales but due to the nature of the
conflicts, they are now deemed to choose side, whether to lay down their
connection with any of the party involved in the conflicts or to be sanctions by the
western. Thus, the result are the sanction, and it lead to declining of sales where
most of them came from the United States which doubles the sales of a single
firearm, the AK-47 last year. This result in declining of market and its force them
to change their business plans.
To summarise, the conflict that broke at the Russia/Ukraine border is the
geopolitical pressure, and their involvement in the conflict indirectly result in
sanctions by the westerns is mandated pressures, and the sanctions which result in
market-decline, and non-existent market which is market-decline pressures, and
the shareholder that are have different opinions in involvement of the
Russia/Ukraine conflict is the power and political pressures.

(Carvalho & Mahlich, 2015)

1.3.Apple wants to start producing cars as soon as 20204 (refer to article III)
From the article, under the recent management of Apple, now they are aiming for
being a car manufacturer as soon as 2020. That is in 5 years, which some people
would call for absurd, as it requires a lot of time to for a firm to make a proper
research and development so it will be safe for the usage of consumers. What had
made Apple to decide to produce cars, a new business segments which had not
been touch previously by them might be the rationales of several pressures that
lead for this changes.
The articles discuss that, Apples management are forced to increase their already
large money pool as the shareholders are increasing pressure to return cash back
to them. Tim Cook, has been pushing iPhone to develop so that it can bring back
cash to them, it seems that, it is still not enough for the shareholders.
The rationales for this articles is as explained above, which we can deduce that it
is a form of power and political pressure, and another is growth pressure
which we could see that Apple is entering a new realm in producing cars.
From the articles, there are several comments from key personal in the automotive
industries. One comment from, Kelley Blue Book, analyst, Maft DeLorenzo said
that, Apple is good at developing technology but car making is, and will continue
to be, a bricks-and-mortar proposition. This signalling that Apple will face with a
new pressure if they decide to continue with the plan, as they have to revamp on
how they manage their business, which mostly online. The pressure might be one
that relate with fashion pressure, as they have mime the organization that are
successful in the industry.

(Bloomberg, 2015)

2. COMPARISON BETWEEN RATIONALES FOR CHANGE

The rationales for each of this articles are different between one another. The first
articles discuss the change undergone, a Malaysian oil and gas company, Petronas,
that are require to allocate a minimum of RM2.1 billion yearly to Sarawak contractors
because of the petition that came from the payment of royalties of 5% that deemed as
insufficient after several decades. The rationale here is that Petronas must change how
they do business with states that they benefitted from, and after years of stubborn
negotiation, now they are mandated to do so. From here, we knew that Petronas are
force to comply with the intention of the state government and the federal government
for the people.
The second article is about Kalashnikov, a firearm maker that are based in Russia that
had been sanctions, by the western or to be exact the US government from selling
their products to the allied nations of United States. The starting point for this is when
Kalashnikov providing firearm to the Russia and Ukraine that are currently in conflict
which result in the loss of many lives. To stop the conflict, the US government tries to
topple down Russia main economy contributor, the firearm industry, thus
Kalashnikov whom indirectly involve with the conflict are now stuck between their
own government and the sanctions. From here also we found out that mandated
pressures that are faced by Kalashnikov are due to intervention of the government.
Probing the third articles, Apple, one of the richest company in the world are forced to
undergone a change due to intentions of the shareholders. Apple are trying to dip
themselves to the realm of car manufacturing in hope that they can grow even bigger
and earn more so that they can give back to the shareholders. The rationale here is a
bit different from the previous two, as they are undergoing the changes due to the
intervention of the shareholders which tribute to the power and political pressure.
The commonalities from these rationales is that, all of it were involved with an entity
with bigger power that may change and effect anything in their firm easily. For the
previous two, they are both intervened by the government in their end result, an entity
with power, as well as Apples shareholders, the people who are richer than several
countries in the world.
We can deduce that, to trigger change in the organizational, whether the situation in
the company are negative or positive, needed or unneeded, an entity with considerable
amount of power will help boost the process of changing by giving the pressure
needed.
4

3. SINGLE VERSUS MULTIPLE RATIONALES

The utilization of single rationale or multiple rationales are all depends on the
situation. Some may need only one rationale to answer on why they need to change,
some other company may need more. According to the previous answered question,
we could see that in the three articles not even once it is the same between each other.
All of them are depends on the circumstances which would then pressure them.
Even with that being said, we can still conclude that multiple rationales is a lot more
utilized than single rationale as multiple rationales will give concrete and solid reason
on expressing pressures for change.

I.

ARTICLES
1. ARTICLE I
KUCHING - Petronas has agreed to allocate RM2.1bil of its oil and gas contracts
exclusively to Sarawak-based contractors annually.
Assistant State Communications Minister Datuk Lee Kim Shin revealed this during
Chinese New Year, saying it was one of the outcomes reached in the on-going
negotiations between Sarawak, the federal government and the national oil company
for more oil royalties for the state.
Lee called it a boon for the state economy and attributed it to Chief Minister Tan Sri
Adenan Satem for taking a firm stand on the "poor deal" the state has been getting for
decades.
"It is due to his strong stand on oil royalty. He put up a very strong petition to
Petronas to give more royalty or other benefits to Sarawak.
"For example, Petronas now has agreed to a few things, for example, a minimum of
RM2.1bil worth of contracts to Sarawakian companies," Lee said here.
"Also, Petronas will give more shares of subsidiary companies, meaning that Sarawak
will benefit more.
"All this while, Sarawakian companies were just sub-contractors. The main
contractors came from outside. Most of our companies have been in the oil and gas
industry for more than 100 years. We have the most experience."
Lee was speaking to reporters at the Chinese New Year open house by the Sarawak
United People's Party (SUPP).
In January, the Chief Minister said among other requests by Sarawak was for Petronas
to help set up more technical colleges and branch campuses in the state.
Last year, within a week of being sworn into office, Adenan told The Star in an
exclusive interview that Sarawak's 5% oil and gas royalty rate from the Federal
Government was not enough.
Subsequently, the state legislative assembly passed a landmark motion urging the
federal government for more oil and gas benefits.
The motion was supported by all elected representatives of Barisan Nasional and
Pakatan Rakyat.

2. ARTICLE II
ABU DHABI - Russian firearms maker Kalashnikov Concern aims to concentrate on
its markets in the Middle East and Africa and diversify its product range to offset the
impact of Western sanctions, its chief executive said on Sunday.
"Sanctions changed sales. After that we had more sales of military weapons in new
markets in the Middle East and Africa," Aleksey Krivoruchko told Reuters at the
International Defense Exhibition (IDEX) in Abu Dhabi.
"It is not just the AK-47, we are diversifying our strategy into a wide range of
products - rockets, drones and others," he said.
Both Kalashnikov and its majority owner, Rostec State Corporation, were among the
companies made the subject of sanctions over Russia's role in the Ukraine, where the
West accuses Moscow of fanning separatist unrest and arming rebels.
Since July, when the restrictions first took effect, Kalashnikov's sales have ceased in
the United States, its biggest foreign market for civilian weapons.
"We had big plans for the U.S. market. People there love our products and our sales
had doubled there," he said.
Now the company has had to refocus its business on the military market, where it is
looking to diversify, he said.
On Sunday Kalashnikov announced in Abu Dhabi that it had acquired 51 percent
stakes in both Zala Aero, a Russian developer of drones, and Euroyachting
Rybinskaya Shipyard, which makes landing craft.
"Both these companies have big potential. The demand for drones is huge in many
markets," said Krivoruchko, who declined to comment further on the acquisitions.
He said sales of assault rifles doubled last year to 120,000, driven by demand in the
Middle East, Africa and Asia, and the company also earned its first profit in seven
years, of 88 million roubles ($1.43 million).
A further increase in profits is expected this year as its new AK-12 assault rifle should
boost sales, he said.
Kalashnikov has also budgeted to spend $100 million over the next two years on
developing new products, he said.

II

3. ARTICLE III
SAN FRANCISCO - Apple, which has been working secretly on a car, is pushing its
team to begin production of an electric vehicle as early as 2020, people with
knowledge of the matter said.
The timeframe automakers typically spend five to seven years developing a car
underscores the projects aggressive goals and could set the stage for a battle for
customers with Tesla Motors and General Motors. Both automakers are targeting a
2017 release of an electric vehicle that can go more than 200 miles on a single charge
and cost less than US$40,000.
Thats the inflection point the proving ground that brings on the electric age,
Mr Steve LeVine, author of The Powerhouse, a book about the automotive battery
industry, said on Bloomberg TV on Thursday (Feb 19). Now you have Apple
coming in and this is critical mass. Was GM really going to be able to match Tesla?
Apple can.
Apple, which posted record profit of US$18 billion during the past quarter, has
US$178 billion in cash with few avenues to spend it. The Cupertino, California-based
companys research and development costs were US$6.04 billion in the past year, and
Chief Executive Officer Tim Cook is facing increased pressure to return cash to
shareholders. The CEO has been pushing the iPhone maker to enter new categories to
further envelop users digital lives with Apples products and services.
Apples possible foray into cars follows a similar path its taken to break into other
industries. The company wasnt the first to make a digital-music player or smartphone,
and only entered those markets once it had a product that redefined those categories.
Apple representatives declined to comment for this story.
CAR TEAM
Teslas success in creating a startup car company has shown that the traditional
barriers of entry into the auto industry arent as difficult to overcome as originally
thought, said one person, who asked not to be identified because the matter is private.
At the same time, automakers have struggled to bring technical leaps to car
development, something that Silicon Valley is also seeking to accomplish. For
example, Google Inc. has invested in developing an autonomous vehicle since 2010.
Apple would have some advantages as a new entrant to the auto industry, including
its cash, ability to connect with its own devices and the infancy of the electric-vehicle
market, Barclays analysts Ben Reitzes and Brian Johnson wrote in a note to investors.
III

Finally, Apples brand arguably the most important advantage is a big attraction
for the next generation of car customers.
Apple may decide to scrap its car effort or delay it if executives are unhappy with
progress, as theyve done before with other secret projects, the people said. The car
team, which already has about 200 people, began ramping up hiring within the past
couple of months as the company sought out experts in technologies for batteries and
robotics, said one of the people.
BATTERY LAWSUIT
An experienced automaker typically spends five to seven years developing a new
vehicle before bringing it to market, according to Mr Dennis Virag, president of
Automotive Consulting Group.
If youre starting from scratch, youre probably talking more like 10 years, Mr
Virag said. A car is a very complex technological machine.
A lawsuit filed this month gives a window into Apples efforts to create a automotive
team for the project. Apple began around June an aggressive campaign to poach
employees from A123 Systems, the Waltham, Massachusetts-based battery maker
said in the lawsuit.
Apple hired five people from A123 and has tried to hire battery experts from LG
Chem, Samsung Electronics, Panasonic, Toshiba and Johnson Controls, according to
the lawsuit.
Apple is currently developing a large-scale battery division to compete in the very
same field as A123, the battery maker said in a separate state-court filing.
The recent hiring effort at A123 began with Mr Mujeeb Ijaz, a former Ford Motor
engineer, who founded A123s Venture Technologies division, which focused on
materials research, cell product development and advanced concepts. He began at
Apple in June and began hiring direct reports from A123s venture technologies
division, which he had headed.
Tesla CEO Elon Musk told Bloomberg Businessweek this month that Apple was
seeking to hire away his workers, offering US$250,000 signing bonuses and 60 per
cent salary increases.
BRICKS AND MORTAR
Apple is good at developing technology but car making is, and will continue to be, a
bricks-and-mortar proposition, Mr Matt DeLorenzo, an analyst at Kelley Blue Book,

IV

wrote in an email. Apple will need a partner, perhaps a Chinese manufacturer, with
an infrastructure if its going to hit the five-year goal.
Some parts of the automotive industry seem unfazed by Silicon Valleys increasing
interest in the market. Last month, before Apples efforts were revealed, Volkswagen
AG Chief Executive Officer Martin Winterkorn brushed off the increasing
competition.
Were not afraid of these new competitors, Mr Winterkorn said at a reception
outside Stuttgart, Germany, according to a transcript obtained by Bloomberg. The
opposite is true: they encourage us to look more intensively into the chances of the
digital world.

II.

REFERENCES
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(21

February,

2015).

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from

Today

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Ji,

Y.

(21

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2015).

Business.

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from

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Star:

http://www.thestar.com.my/News/Nation/2015/02/21/Sarawak-Petronas-agrees-formore-allocation/
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VI