An organisation will encounter three environments that will effect the business and possibly be a catalyst for change within the organisation;-
· Internal Environment
This is within the organisation and includes staff, resources and faculties. These can be controlled by the organisation.
· Near Environment
This is the environment outside of the organisation, such as customers suppliers and compeitiors, these can be influenced and coerced.
· Far Exterior Environment
This is the environment identified below (STEEP), and cannot be controlled or influenced by an organisation.
STEEP is used to demonstrate how different pressures on an organisation drive the need for change, the drivers make up the acronym STEEP and are thought of as the fingers pushing into a balloon, in that too much pressure and the balloon (organisation) will burst (fall apart). The factors in a STEEP analysis are regarded as being in the Far External Environment and as such cannot be controlled or influence, only reacted to.
It comes back to the question “why change” and as shown below; because outside factors keep changing.
The “want it yesterday” attitude more prevalent these days is different to the days of mail order companies in the 80’s that aimed for 28 days for delivery, next day delivery is now considered normal. As such organisations have had to dramatically change their logistics side of their business to provide such a service.
Internet and electronic transactions are common place these days, for example an organisation specialising in the sale of car insurance, would be failing if it didn’t take advantage of the online insurance quotes. Another example would be a bank that didn’t provide online/telephone banking services, failure to keep up-to-date with technological developments, whilst their competitors take full advantage of them, will quickly result in the failure of an organisation.
A very important pressure on an organisation is the economy, changes in exchange rates can be disastrous. For example a supplier only accepts payment in their native currency (i.e. Euro) and there is an decrease in the value of the pound could result in a large difference in what the organisation requires to pay.
Another changing area has been the movement by companies towards so called “green credentials”, fifteen years ago an organisation would not be broadcasting their CO2 emissions and sustainability as much as organisations do now. The environmental credentials of an organisation could add extra value to an organisation from the perspective of a customer.
There are political factors that can put pressure on an organisation, this could include changes to laws, which could have a severe impact on what can/who it can be sold to. A strong example would be the changes to the smoking in enclosed places law which was passed in April 2007, which many believe has contributed to a decline in the number of public houses.