For continued success, a business must be ready to adapt to external forces. To adapt, an organization must recognize what external forces are likely to prompt change. Ignoring those external forces, and pretending that an organization operates in a vacuum, can lead to its failure in the market or to its collapse from within.
Customers may be leaving and reporting that they are unhappy with how they are treated, unhappy with the product they purchased or unhappy with the policies of the company. Customers may also apply pressure while they are still patronizing a business by making complaints. This was the case at Lloyds TSB bank, where all overdraft charges were reduced in response numerous customer complaints.
An organization may be purchased by an outside company or individual. Often that new owner will want to use a new ways of running the organization that has worked for it in other businesses. The new owner may be planning to cut inefficiencies by reducing the workforce, use a different inventory management method or have a management philosophy that will require big changes in the organization.
Sales may have declined because of competition from a similar company that has always been an opponent in the marketplace, or competition from a new company with a different way of winning customers. If a business wants to stay competitive, it will need to fight back by changing the way it operates or changing what it offers to customers. While engaging in competition is usually an inherent part of doing business, that competition may be especially threatening if it comes from an adversary which has some advantage that the organization was not prepared for.
Technology can bring positive change to an organization, by boosting efficiencies or making new products possible. It can also endanger an organization that is dependent on the old way of doing things. A business that faces this challenge can often find a way to incorporate the new technology and grow, although this is not always possible.
The industry that the organization is a part of may be subject to new regulation, or may simply have existing regulations changed. The new rules might only affect a part of the organization, but it is possible that every aspect of the way the business operates will have to change to comply.
A catastrophic event can wipe out a business immediately, but if that business continues to operate in the wake of some disaster it will likely need to change. It may have a decreased work force, fewer customers, damaged equipment or customers with different needs. To stay in business, that organization will need to change to accommodate its new circumstances and the needs of its customers.
- Guardian UK; Lloyds TSB Reduces Overdraft Charges Following Customer Pressure; Jill Insley; June 2010
- Database Marketing Institute; Why Customers Leave, and What You Can Do About It; Arthur Middleton Hughes
- College of Business at Illinois Department of Accountancy; Strategic Analysis of External Forces