L2 - Wk 7 - Factors that cause change - 4510

• New lesson editor
• Engineering
• Further Education (Key Stage 5)

We'll explore what forces drive companies to change and adapt

Learning Target: You will identify and categorise internal and external factors that cause organisational change

Think about a company you know well (Apple, Netflix, McDonald's, etc.)

In pairs, share one major change you've noticed in that company over the past few years

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Internal External Video

Which one best describes External Factos of change drivers?

A

Forces from within; generally controllable by management

B

Forces from outside; generally uncontrollable by the organisation.

C

Executive leadership, departmental managers, employee base

D

Decisions made by a new CEO

Which one best describes Internal Factos of change drivers?

A

Forces from outside; generally uncontrollable by the organisation

B

Governments, global economies, societal shifts, ecological realities

C

Forces from within; generally controllable by management

D

Social, people and beliefs that change with the times

PESTEL

Video

External factors are largely beyond a company's control, requiring constant monitoring. The PESTEL framework acts as a strategic radar to categorise these forces.

Scanning the Horizon: The PESTEL Radar

Political factors

Economic factors

Social factors

Technological factors

Environmental factors

Legal factors

Political Drivers

Minimum wage changes require adjustments to labor costs

General Data Protection Regulation (GDPR) - data protection laws

Changes in government policy, laws, and political stability

Trade tariffs force operational restructuring

These factors force companies to adjust their operations and strategies

Discussion: How might a change in trade policy affect a clothing company that manufactures overseas?

Economic Factors

Inflation is the rate at which the general level of prices for goods and services rises, causing the purchasing power of money to decline over time.

An interest rate is the cost of borrowing money or the reward for saving it, expressed as a percentage of the principal amount over time

Economic shifts affect supply, demand, and profitability

Companies must adjust pricing, production, and investment strategies

Discussion: How would rising inflation affect a restaurant chain's operations?

Social factors

Society's attitudes, culture, demographics, and lifestyle trends evolve

Companies must align products and services with changing social values

Remote and Flexible Working

Social Change: Post-pandemic expectations and a cultural focus on work-life balance made remote and hybrid working the norm.

Business Adaptation: UK corporate service firms, law firms, and tech companies downsized central London office spaces, invested in collaboration software (like Microsoft Teams or Slack), and redesigned HR policies around flexible hours to attract and retain talent

Rise of Ethical and Purpose-Driven Consumerism

Consumers—particularly younger demographics—increasingly expect brands to take stances on sustainability, fair pay, and climate change.

Business Adaptation: UK high street retailers and grocers (such as Marks & Spencer and Sainsbury’s) expanded transparent supply chains, removed single-use plastics, and adopted Certified B Corp standards to prove social responsibility and protect brand loyalty

Aging Population

The UK’s aging population has led to a rising prevalence of age-related conditions like dementia.

Business Adaptation: Innovators and care providers—emerged to build specialized e-commerce platforms and product curation specifically for families and care homes supporting people with memory loss

Discussion: Share an example of how social changes have influenced a company you know

Technology Factor

Technological advancements create new opportunities and threats

Companies must embrace new technologies or risk becoming obsolete

Ride-sharing apps disrupt traditional taxi models

Ride-sharing apps like Uber disrupt traditional taxi models by shifting from a rigid, asset-heavy pipeline business to a flexible, software-driven platform that directly connects independent drivers with passenger

Streaming Disruption

Netflix forced traditional TV networks to adapt by shifting the entire media industry from scheduled programming to an on-demand, direct-to-consumer streaming model

AI chatbots revolutionise bank customer service efficiency

AI chatbots improve customer service by automating routine tasks, providing instant responses, and freeing human agents to handle complex issues

Reflection Question: What technology has most disrupted traditional business models in your lifetime?

Environmental Factors

Physical environment and ecological concerns drive change

Companies face pressure to adopt sustainable practices

Environmental regulations

Strict EU climate regulations and fleet emission targets directly force Volkswagen (VW) to spend billions on electrification while navigating severe financial and operational pressures

Raw material scarcity

Major global automakers like General Motors, Ford, and Tesla altered their manufacturing and design practices due to a severe scarcity of silicon and semiconductor raw materials

Water scarcity

Water scarcity poses a material risk to beverage production, prompting Coca-Cola to implement extensive water stewardship and conservation programs. As a primary ingredient in its products and a critical component of its manufacturing processes, secure access to clean water is vital for the company's operational continuity and long-term sustainability

Question: Can you identify one environmental factor affecting businesses today?

Legal Factor

Laws and legal requirements govern business operations

Companies must ensure compliance to avoid penalties and maintain reputation

Corporate taxation

Corporation Tax is a direct tax paid to HMRC on the net profits of limited companies, foreign companies with UK branches, and certain unincorporated associations

Antitrust scrutiny

Landmark court rulings are forcing major technology companies to alter their product designs, distribution agreements, and advertising business models

HASAWA

Workplace safety laws mandate strict training protocols to eliminate hazards and protect workers. Government agencies like HSE in the United Kingdom enforce these laws to ensure every worker understands site dangers before stepping onto a job site

The Micro-Environment:

Competitive Landscape Forces

Question: In pairs Discuss how competition has changed the smartphone industry?

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Which external factor includes changes in government policy, laws and political stability?

A

Social

B

Political

C

Economic

D

Technological

Which factor most directly affects demand, pricing and profitability during a recession?

A

Environmental

B

Economic

C

Legal

D

Social

Changing lifestyles, values and population trends are examples of which factor?

A

Political

B

Technological

C

Social

D

Legal

A company adopts artificial intelligence to avoid falling behind competitors. Which external factor is driving this change?

A

Economic

B

Technological

C

Environmental

D

Political

Pressure to reduce waste and use sustainable materials is mainly linked to which factor?

A

Legal

B

Environmental

C

Social

D

Economic

Which external factor is most closely concerned with complying with regulations to avoid fines?

A

Technological

B

Political

C

Legal

D

Environmental

External factors that make companies change

Companies often need to change because of forces outside the business. New technology can make old products seem slow or outdated. A change in law may force a company to improve safety or protect customer data. When the economy becomes weak, people may spend less money, so firms reduce costs or offer cheaper options. Customer tastes can also change over time, especially because of social media and new trends. Strong competition from other businesses may push a company to lower prices or improve quality.

technology

law

economy

tastes

competition

weather

manager

profits

factory

training

Internal Factors: Forces from Within

●Internal factors are generally controllable by the organization

●Arise from decisions or conditions within the company

●Management has more direct influence over these factors

●Companies can proactively manage internal change drivers

Mission Redefinition

Strategic Pivot

New CEO Vision

Satya Nadella transformed Microsoft by pivoting the company from one-time perpetual software licenses to recurring cloud subscriptions and enterprise services.

Cloud-First Strategy: He prioritized the growth of Microsoft Azure, building it into a major global cloud platform that competes with Amazon Web Services.

Subscription Business Models: He phased out traditional perpetual Office software licenses in favor of subscription-based offerings like Microsoft 365

Twitter (now called X) functions primarily as a real-time information network rather than a traditional social network. Most relationships on the platform are asymmetric. Users follow accounts to consume information rather than build mutual, two-way personal connections like on Facebook or LinkedIn.

Breaking News and Trends: The architecture—featuring short posts, hashtags, and trending topics—is built for real-time broadcasting, live event tracking, and public commentary rather than private social archiving

Patagonia embedded environmental activism into its core business strategy by aligning its corporate structure, supply chain, and marketing directly with ecological preservation. Changed its mission statement to "We're in business to save our home planet". The company donates 1% of its total sales (not just net profits) to grassroots environmental organizations as a fixed operating cost, totaling over $240 million in grants since its founding

Discussion: How can new leadership transform a struggling company?

Profitability Issues

General Motors has historically used sweeping structural cuts—both during its 2009 bankruptcy restructuring and its major 2018–2019 realignment—to systematically eliminate slow-selling sedans and unallocated factories.

The company has aggressively continued this strategy by scaling back its capital footprint, dropping underperforming legacy segments, and shifting capacity between EV and internal combustion engine (ICE) production to protect margins.

Quality Problems

Toyota implemented comprehensive recall and quality control measures following major historic safety crises (such as the 2010 unintended acceleration and Takata airbag scandals) and more recent software-related campaigns, like the October 2026 recall of over 30,000 RAV4 plug-in hybrids

Growth/Reorganisation

Google restructured into Alphabet Inc. in August 2015 to separate its core internet business from riskier, long-term experimental projects.

New Parent Company: Alphabet Inc. was created as a holding company to act as an umbrella over Google and several other diverse subsidiaries.

Slimmed-Down Google: Google became a wholly-owned subsidiary focused strictly on core internet products like Search, Advertising, Maps, YouTube, Android, and Apps.

Leadership Changes:

Co-founder Larry Page became CEO of Alphabet (with co-founder Sergey Brin as President).

Sundar Pichai was promoted to CEO of Google

Downsizing

During the COVID-19 pandemic, global airlines drastically scaled back operations, grounding fleets, slashing networks, and cutting thousands of jobs.

Global and European Drops: Passenger traffic and flight schedules plummeted by up to 97% during peak lockdowns.

Fleet Groundings: Many carriers parked hundreds of aircraft or permanently retired older 4-engine jets (such as the Airbus A380 and Boeing 747) to cut costs.

British Airways announced plans to cut up to 12,000 jobs out of its 42,000-strong workforce while furloughing thousands of others.

Other carriers implemented massive cutbacks, including easyJet laying off thousands of cabin crew, Qantas placing 20,000 workers on leave, and Air Canada reducing staff by over 15,000

Mergers & Acquisitions

The Walt Disney Company's $4.24 billion acquisition of Marvel Entertainment in December 2009 required blending two distinct corporate and creative cultures—merging Disney's family-oriented, traditional animation roots with Marvel's edgier, action-packed comic book universe.

Demographic and Brand Expansion: Disney traditionally focused on family and female-skewing audiences, whereas Marvel brought a dominant, masculine fanbase ranging from young boys to adults. Integrating the brands allowed Disney to capture teenage and young male demographics

Performance Gaps Drive Change

When actual performance falls short of goals and objectives

Declining Market Share

Kodak's failure to adapt to digital led to bankruptcy. Kodak’s 2012 bankruptcy is the ultimate textbook case of the "Innovator’s Dilemma", where a company’s past success directly causes its failure. Paradoxically, Kodak did not fail because it lacked innovation; it failed because it suffered from strategic paralysis and an inability to adapt its business model. Kodak actually invented the world's first digital camera in 1975, However, corporate executives corporate-suppressed the technology. Management feared that marketing a digital camera—which required no film—would destroy their incredibly lucrative, recurring cash-cow business.

Kodak believed it was in the "film and paper" business rather than the "memory sharing" business.

The 10-Year Warning: A 1981 internal market study accurately predicted that digital would completely replace film within a decade. Management had a 10-year window to pivot but chose to use digital technology merely to try and improve film sales

Discussion: Share how a company's structure might change during rapid growth

Organizational Structure Evolution

Changes in company size require structural adjustments

Which statement best describes an internal factor in an organisation?

A

A force outside the business

B

A change in customer tastes

C

A government economic policy

D

A controllable influence within the business

Why can managers usually respond more directly to internal factors than external factors?

A

They control exchange rates

B

They influence company decisions

C

They set market demand

D

They manage weather patterns

Which of these is most likely to be an internal driver of change in an organisation?

A

New tax law

B

Rising inflation

C

Staff restructuring

D

Competitor entry

Internal factors and organisational change

Internal factors come from within an organisation rather than from the external environment. Because they are usually more controllable, managers can respond to them more directly. For example, a change in leadership may alter decision-making, communication and workplace culture. Internal factors often arise from company decisions or existing conditions, such as staffing levels, finance or technology. This means a business can often act proactively to manage change instead of only reacting after problems appear. As a result, internal factors can strongly affect how an organisation operates from day to day.

within

controllable

leadership

decisions

proactively

operates

outside

unpredictable

marketing

accidents

passively

competes

Categorising Forces of Change

External

Internal

Executive leadership, departmental managers, employee base

Anticipate, monitor, and adapt business models to mitigate threats

Governments, global economies, societal shifts, ecological realities

Proactively initiate, restructure, and pivot operations to close gaps