All companies face some threats in course of doing business. Management should identify those threats and take strategic actions accordingly. There are some signs by which management can identify the threats to a company’s future profitability. However, threats to a company’s future profitability can arise from the following areas:
- The emergence of cheaper or better technologies.
- Introduction of new or improved products by the rivals.
- The entry of lower-cost foreign competitors.
- New regulations those are more burdensome to a company than to its competitors.
- The rise in interest rates.
- The potential for a holistic takeover.
- Unfavorable demographic changes.
- Adverse changes in foreign exchange rates.
- Political upheaval (disorder) in a foreign country where the company has facilities.
Shield yourself against threats, For example:
- Build successful relationships (win/win) with suppliers and customers.
- Cultivate good employee relations.
- Procure insurance against evident debacles.
- Establish the right types of service contracts for key personnel.
- Invest in legal protection for your intellectual property.