Causes of change
With increasing globalisation and rapid developments in markets around the world, change is inevitable in all aspects of business operations. No firm or organisation can rely on their customer base staying loyal over the long-term. Expectations and needs change rapidly and firms have to adapt to meet these. However, change is not always easy to manage effectively and there may well be resistance to change.
External drivers of change
Change may result from a range of different areas, but stems mainly from change in the external environment. The causes of change may include:
- Social factors and changes in consumer tastes - consumer expectations and tastes change over a period of time and firms need to adapt to this. For example, the growth in sales of organic and Fairtrade products in recent years has forced many food producers to adapt their product ranges.
- Market changes - new competition, changes in the structure of markets and other factors will affect how firms operate. For example, the growth of the European Union and the emergence of many other free trade areas around the world has changed the structure of many markets and led to more competition as tariff and other barriers are broken down.
- Population changes - changes in the population structure will mean that firms need to change. This may be because of changes to the potential supply of labour to the nature of their markets in which they operate. An ageing population in many developed countries will result in shortages of workers as well as changes in the pattern of demand for goods and services.
- Technological developments - changes in technology have led to new opportunities, both in production terms, but also in terms of product development. Recent years have seen a plethora of new technology-based products emerging.
- Legislation - political change may also affect firms and the way they operate. For example, changes in health and safety legislation may require a firm to change or adapt their production methods and/or product specifications.
- Economic trends - the recession that began in late 2007, has already had significant effect which will continue for years to come. Customers shopping habits will adapt to the new economic climate and firms will be forced to adapt as well.
Internal drivers of change
The internal resources of a business are in constant flux, and management needs to be aware of these and to react appropriately. The need to change can be driven by:
- Changes in the nature and size of the workforce
- New management and/or management styles
- Financial requirements and the availability of funds
- Changes in the expectations, attitudes and values of the workforce
- New product and service offerings
- The firm's corporate image if it is based on dynamism and innovation