External Factors
External environments can change rapidly
and companies may not be able to
change accordingly.19 Knowing the nature
of one’s market is of primary importance
to success. Many restaurants fail each year
from an inability to understand, adapt to,
or anticipate market trends, especially
given that some market trends are more
difficult to foresee than others. For
instance, many restaurateurs must have
been shocked by the wild popularity of the
Atkins-inspired low-carbohydrate diet,
followed almost as suddenly by its apparent
abandonment by many customers. To
provide the products desired as market
preferences shift, operations must trust
and have working relationships with their
suppliers. Because the resources necessary
for business survival come from the
external environment, this relationship is
important in explaining restaurant failure.
O’Neill and Duker found that governmentrelated
policies affect business failures.20
Along that line, Edmunds pointed to the
heavy burden of taxation and regulation as
contributing to increased business-failure
rates.