1. Compare and contrast views on the change process. 2. Classify types of organizational change. 3. Explain why people resist change and how resistance might be managed. 4. Explain the strategies for managing cultural change 5. Explain the three variables that nurtures and stimulates innovation. CASE APPLICATION - A. S. Watson Group Founded in 1828, the A. S. Watson Group began as a small dispensary in southern China's Guangdong Province. In 1841, the dispensary was relocated to Hong Kong, and the company officially traded under the name A. S. Watson & Company since the 1870s. In 1981, it was acquired by Hutchinson Whampoaa Hong Kong conglomerate controlled by business magnate Sir Ka-Shing Li. Benefiting from Hutchinson Whampoa's solid economic strength, A. S. Watson launched a number of mergers and acquisitions in Asia and Europe in the late 1990s. For example, in 2000, it entered the United Kingdom by acquiring Savers Health & Beauty. In 2002, the company expanded its European business by acquiring Dutch Kruidvat Group. In 2014, Singapore's Temasek, a stateowned investment company, paid $5.7 billion to acquire a 25 percent stake in Ka-shing's Watson. Today, A. S. Watson Group is one of the largest health and beauty retail groups with more than 12,000 stores operating in more than 30 countries. Its business spans from health and beauty products and luxury perfumeries and cosmetics to food, beverages (fine wine, bottled water, fruit juice, and tea drinks), and electronic products. Despite the successes, managers at A. S. Watson Group find it difficult to integrate newly acquired businesses with existing ones. How to transfer a local pharmacy into a global health and beauty retail group is a huge challenge for the company's senior managers. Effective procurement, efficient logistics, and distribution systems can help to achieve positive financial returns in the retail industry. Indeed, many retailers endeavour to maintain efficient distribution systems, lower labor costs, and firm-level economies that give them bargaining powers over their suppliers in order to cut costs. Compared to many other big players in this field who rely on price wars and low costs to gain sales revenue and expand market share, A. S. Watson is gaining competitive advantage by providing unique shopping experiences to its customers. In recent years, A. S. Watson Group highlighted its uniqueness with the proposition to help customers to "Look Good, Feel Great, and Have Fun." A. S. Watson Group adopts a set of employee training modes to not only improve staff's product knowledge, sales, and service skills but also to promote the group's business philosophy to each employee. The top management team believes that appropriate training will facilitate employees to understand the company's strategy and, hence, smooth its change from a regional company to a global retailer. Following these managerial techniques, A. S. Watson Group has expanded its business in a creative way. The company introduced a "personal care store" concept in more than 15 Asian countries and regions, offering food, drugs, and health and beauty products. Compared to traditional "one-stop" supermarkets (e.g., Walmart, Tesco, and Carrefour) and local cosmetics boutiques, an A. S. Watson Group personal care store emphasizes excellent customer services and sells its own brand products. Although its own brands account for an average of 15 percent of all sales in the retail sector in developed countries, this branding strategy was at the introduction stage in Asian countries in the 1990s. This new business model caters to local emerging middle-class tastes and thus sets up the new industrial standard in many Asian countries. So what have made A. S. Watson Group and its personal care stores successful in Asia? The economic strength from its parent company? Its international mergers and acquisition strategy? Or managerial capabilities that enable A. S. Watson Group to identify market niches in Asian economies and then creatively implement a "personal care store" concept to fill the niche? It seems like there is no single answer to this question. A. S. Watson Group was the first retailer to realize the importance of the emerging middle-class customers and develop a business model to meet their needs. However, such first-movers advantage will not be sustainable as competitors can easily imitate its business model. Into its 175th year of operation, the firm's continued success depends on its competency to provide innovative products and services in response to individual market preferences. DISCUSSION QUESTIONS a. What kind of change processes did A. S. Watson Group experience since the late 1990s? Discuss the activities that were conducted to smooth the change. b. What's your interpretation of the company's philosophy "Look Good, Feel Great, and Have Fun"? How does such philosophy make A. S. Watson Group's personal care store differ from its competitors? c. What could other companies learn from A. S. Watson Group's "new business model"?