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10:30 PM 4 pivotal factors which affect business environment

We are clearly in a new era marked by volatility and intense global competition, which places tremendous financial pressure and higher degrees of risk on enterprises. As a result, businesses have an urgent need to adapt quickly to life in this new era and the market reality that they now face. But it is important to first understand the market forces that are compelling businesses to transform their fundamental organizations, relationships, and processes.  Continuous change  Rigorous competition  Unrelenting financial pressures  Unpredictable threats Continuous change The pace of change continues to gather speed, affecting virtually every aspect of business and our everyday lives. Technology innovation is accelerating exponentially in processing power, miniaturization, connectivity, and price and availability. This evolution of technology continually expands the realm of what is possible. Consumers are very technology savvy and are embracing new technologies faster with each successive wave of technological advances. Businesses compete in an era where real-time information and information access is available virtually everywhere and at any time, allowing clients and competitors to adjust their behavior at ever increasing speeds. Further, due to the interconnectivity of world markets, any disruption (whether it’s regulatory, sovereign, terrorism, or disaster related) produces wide ranging shocks and ripples that may have persistent affects on the business environment. As organizations find that competitive advantages are harder to sustain, they are compelled to respond to market changes more dynamically than in the past. This results in shorter, but more frequent business cycles across industries. In some cases, the balance of power in an entire sector or industry can be upset or reversed in an extremely short time frame. For example, this power shift has happened in the consumer goods industry.  Large retailers now clearly have a tremendous influence on their consumer packaged goods suppliers. They have forced efficiencies and automation back through the entire value chain to drive out every possible cost. This creates an environment where suppliers have no choice but to respond quickly. Rigorous competition The competitive environment that businesses are facing is becoming remarkably intense. Both new and established players struggle to provide value to clients in increasingly transparent markets. These are markets in which large amounts of relevant data, such as product pricing, features, quality, trusted ratings, and so on, are available, with minimal cost, in real-time to clients, competitors, and suppliers. It is very easy for the customer to go online or somewhere else for similar goods and services, often at an equal or better price. Clients are armed with greater information and more choices than ever before. They have raised their expectations in terms of low prices, increased service levels, and higher-quality products. Both traditional and emergent competitors, in pursuit of elusive growth opportunities, are seeking to do the following:  Expand market share  Enter new geographic, product, and demographic markets  Change the way that their markets are defined The globalization of business services, in addition to traditional manufacturing activities, further intensifies competition as enterprises exploit global scale and cost disparities at an ever-increasing rate. These factors, combined with a litany of conflicting and changing local, country, regional, and global regulations, have created the most challenging and complex competitive business environment in recent years. Unrelenting financial pressures Growing the aggregate value of an enterprise consistently over time is extremely difficult as top line growth tends to slow, profit margins are squeezed, and informed investors increasingly regard business performance with cynicism. Higher levels of competition and fluctuating demand have produced an environment of reduced margins and rates of return. To sustain bona fide profit levels, companies cut cost, outsource, and process performance enhancements. To create new, long-term value for shareholders, companies need to grow revenue at a higher rate than that of the overall market. They must do so with financial transparency (for example, with complete disclosure to shareholders and regulatory bodies), predictable results, and reputable management standards. Unpredictable threats Risks to business performance and continuity are becoming more widespread as companies are exposed to larger, damaging shocks to their competitive and operating environments. Any unexpected outbreak of geopolitical instability produces a threat to businesses and affects energy prices and the availability of other resources and capital. As a result, companies must be prepared for risks associated with terrorism, military actions, legal decisions, political actions, or regulatory mandates in every country (region) in which they operate. Other dangers, such as computer viruses or network hacking, may disrupt business operations or place client or employee security and privacy at risk. Natural disasters, which have been on the increase, have the ability to threaten business operations or even shut down an entire industry supply chain without warning. As seen recently, unexpected dangers can emerge quickly and have far-reaching consequences. For example, the economic effects of Hurricane Katrina, which hit Louisiana and Mississippi in late August 2005, were far-reaching. The repairs and reconstruction in the region have made it the costliest natural disaster in US history. Also consider the damage to the economy caused by the interruption of the oil supply, and closure of ports had a dramatic effect on imports and exports. Also, before the hurricane, the region supported approximately one million non-farm jobs, with 600,000 of them in New Orleans. The impact to the country and particularly Louisiana and Mississippi were enormous. Organizations that operate with traditional approaches have difficulty competing effectively in such an intense business environment. Businesses need to have safeguards in place against unimaginable threats. More importantly, companies must build sufficient flexibility to react quickly to the unimaginable when it happens.

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