Changing objectives
Changing objectives in response to changes in the external and internal environment
Aims and objectives are not fixed, but will change from time to time in response to changes in the internal and external environments, which offer opportunities or pose threats.
Internal environment:
This is the part of a business under its control and includes factors such as developing human resources, financial planning and marketing.
The drivers to change in the internal environment may be negative or positive.
Negative changes may include:
- High staff turnover and/or absenteeism
- Falling quality standards
- Loss of productivity and falling motivation and morale
- Liquidity problems
- Increasing costs
These negative changes are a threat to the business and must be addressed.
Positive changes may include:
- The recruitment of talented and experienced individuals
- Improving productivity and quality
- Successful innovation
- Exceeding performance measures
Again positive changes should elicit some changes in business activity. These might involve changing budgets or success criteria or strategic objectives. If change does not happen the firm may still perform well, but below its capabilities.
External environment:
This external environment is the 'world beyond the firm', and is not controllable by it. It includes political, economic, social and technological change which impacts on the business and its markets. The external environment provides the opportunities for business growth and development and poses threats to its financial and operating activities.
The drivers to change in the external environment may be negative or positive.
Negative changes may include:
- Recession
- New competition
- Innovation and new products from competitors
- New laws and regulations which increase the firm's costs
- Changes in social behaviour and trends which will decrease demand for a firm's products and services
These negative changes are a threat to the business and must be addressed. Although the firm cannot change the external environment - it may alter its business practices and operations to reduce their effects.
Positive changes may include:
- Economic recovery and boom periods
- New technologies that will reduce production and/or operating costs
- Changes in consumer behaviour that favour the firm's products and services
- Reductions in taxes
As with internal changes, changing external factors should lead the business to review its corporate objectives and strategy and adjust its plans for the future.
The firm must consider how significant the changes are, and how important it is to change... and in what time span. Change can be expensive and involve considerable organisational adjustments. It also may unsettle stakeholders.
