Internal and external factors have a huge effect on the success or failure of a business. Business owners can’t control external factors, but they must be able to anticipate and adjust to these factors to keep their organizations on track. However, business owners and leaders do have significant influence over internal factors that affect a business, and how they handle these internal factors will have a major impact on the future of their companies. Leadership refers to the people in your organization that make all the major decisions regarding financing, budget, sales, marketing, and human resources. Companies with strong leadership have a clear vision for the future, a plan of how to achieve their goals and a quantifiable way of measuring success. They have also developed the kind of management structure that enables employees to feel empowered, while also meeting production and sales goals. Weak leadership is like a ship without a rudder that has no direction and is in danger of sinking. Leaders that lack a strong vision and that are unable to properly manage their teams will find it difficult to achieve their goals. Strong businesses feature motivated workers that understand management’s expectations and are given the tools, training, support, and encouragement to not only meet those expectations but to exceed them. It’s not enough for leaders to hire qualified employees, because every good company does the same thing. For a company to consistently produce high results, managers must ensure that they are in constant communication with employees and that any problems or dissatisfaction within the rank-and-file is handled in a timely manner. When employees feel valued and rewarded, they will go above and beyond to maintain a high organizational standard. Do your employees understand why your company exists? In other words, has management communicated the mission statement of your business, which is the underlying reason that you make specific products and offer specific services? Defining the ‘why’ of a company rather than the ‘what’ of a company is the key to providing your employees with the motivation and buy-in that affects how hard they work, and how much they believe in what they do. For example, the shoe company Zappos developed a mission statement that it was always about pleasing the customer, no matter what it took. That mission enabled Zappos’ management to give employees the discretion to give discounts and freebies to customers without supervisor approval. As a result, Zappos soon became known as one of the best customer service companies in the world. Unless you’ve invented something unique, there are other companies in your industry that sell what you sell. That means you have to be aware of your competition and what they’re doing in the marketplace, and use that information to distinguish yourself in as many ways as possible. Although you can’t control what your competitors do, you can find areas of weakness in their marketing and use that to your advantage. Customers are flaky and unpredictable, and just when you think you’ve got their loyalty, they move on to the next big thing. You can’t control customer behavior, but you can study it and learn how to adapt to changes that could impact your sales. When customers indicate they want something you’re not offering, you may want to listen and start offering what they’re asking for, before your competitors do. Business owners can’t control the economy, but they must respond to indicators that trend upward or downward, then adjust their own operations accordingly. For example, if economists forecast a recession, it could be time to tighten budgets, eliminate some projects, and remain in a holding pattern until things improve. However, when the economy grows and interest rates are low, that could make it easier for you to obtain low-interest loans to help expand your business.
Mastering some of the forces that impact your business is more challenging than handling others. The extent to which you can control them differs. You can change how internal and external factors affect your firm. You cannot make the economy grow. But, you can encourage spending. Learning more about the factors at work will better equip you. In this article, I will not go into much detail about external factors. I will discuss elaborately how internal factors can impact a business. I will talk about the most popularly assessed internal factors. The internal business environment comprises of factors within the company which impact the success and approach of operations. Unlike the external environment, the company has control over these factors. It is important to recognize potential opportunities and threats outside company operations. However, managing the strengths of internal operations is the key to business success. The role of company leadership is an essential internal factor. Your leadership style and other management style impact organizational culture. Often, firms provide a formal structure with its mission and vision statements. Some cultural implications which result from leadership approaches are:
The strength of employees is also an essential internal business factor. Check if employees are motivated, hard-working and talented. They will produce better results compared to an unmotivated and less talented workforce. The processes and relationships between and within departments can also improve effectiveness and efficiency. In a high performing workplace, the workers not only have talent, but they also work better together. The employees and departments collaborate on ideas and resolutions. The internal factors basically include the inner strengths and weaknesses. Internal factors can affect how a company meets its objectives. Strengths have a favorable impact on a business. Weaknesses have a harmful effect on the firm. Some examples of areas which are typically considered in internal factors are:
Companies must also consider softer elements like company culture and image, the role of key staff, operational efficiency and potential. Below, I have mentioned the most common internal factors. These might affect your business in various ways.
These are a part of the operational and administrative procedures. This includes disorganized or inaccurate record keeping. Interruptions to your supply chain and outdated or faulty IT systems are also factors you should evaluate. If you do not overcome these, your customers might see you as unreliable. You can also lose all your data. These affect your firm’s ability to reach the goals in the business plan. They could be due to the impacts of changes in technological evolutions or customer demand. These factors could pose as threats as they can alter how customers perceive your product. Based on these, customers might think a product is overpriced, dull and outdated. Your business needs innovation in order to keep up with competitors. It is essential to get one step ahead. Innovation could come in the form of marketing. It could also be through promotional initiatives in the marketing plan, staff training, and welfare. Embracing new technology is the best way to keep up with technological advancements. A lack of innovation can pose a serious risk to a growing business. No innovation will cause a company to remain boring. The company will become dull, stagnant and irrelevant. The financial risks depend on the financial structure of your business. It is also dependent on your business transactions and the financial systems. For example, changes in interest rates or being overly reliant on one customer could affect business. Speaking of interest rates, if you need financial assistance, you could benefit from competitive interest rates from ChoiceCash Title Loans. Employees are vital to business success. But, there are risks associated with them. For an industry, strike action could lead to a lot of problems. Internals Factors in SWOTThe internal factors of a business are often studied in a SWOT analysis. The SWOT matrix is a structured planning method. You can use SWOT analysis to analyze your company and its environment. It assesses the strengths, weaknesses, opportunities, and threats. The strengths and weaknesses of a project or business are internal factors. Opportunities and threats are external elements. StrengthsStrengths are the features of your business which allow you to work more effectively than competitors. Your specialist technical knowledge could be your strength. You will have to consider your strengths from own point of view. You should also give importance to customers’ and clients’ view. You must be honest and realistic. When you try to find company’s strengths, try to answer the below questions:
WeaknessesWeaknesses are the areas which have scope for improvement. Find out if your business is new products or skills. Also, try to find if you have a lower productivity or higher cost base than your competitors. You will have to face the unpleasant truths about your firm and be realistic. Ask the following questions:
The greatest thing about internal factors is that you have control over most of them. Changing internal factors often involves some indirect costs. Some of the factors are a result of the way you run your business. Example of this includes reputation, credit worthiness, and image. Other factors depend on your business decisions. Example of this includes management structure and staffing. Image: Rawpixel.com/Shutterstock.com |
What are the internal and external factors that affect an organization
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