Question

Demonstrate an understanding of the main factors, both internal and external, which impact Businesses.

detailed answer please

Answer 1

Internal and External Factors Affecting Business

Internal and External Factors That Influence Business Environment and Growth

Business, as it is conducted in our world today, is dynamic. Some factors affect business. These factors can be internal to the business. These factors can also be external to the business.

These internal and external factors make up the environment of business and factors that affect business.

In this article, we are going to be looking at the internal and external factors that can affect business.

The internal factors that affect a business are such factors as employees, competitors, customers, suppliers and the culture of the organization. These are factors which business can control.

The external factors affecting a business comprise of such factors as technology, government, and its policies, economic forces and elements, socio-cultural factors, and international factors. These are factors which business cannot control.

We shall now explain these internal and external factors of business in detail.

Internal Factors Affecting Business

What are the internal factors of a company? The internal factors as we mentioned above are:

1. Employees

Employees refer to the general workforce of the organization or business. These are the people (Men and Women) who engage in production.

They affect business in more ways than one. Employees should be treated fairly and with respect because any perceived ill-treatment to the employees can affect business.

One way that employees express their disaffection is through industrial strike actions. And when this happens, it can affect the production of the business.

1. Competitors

Competitors refer to those who are in the same line of business. A typical example of competitors is Nike and Adidas.

These two companies are in the same business as the production of sports apparels, this makes them competitors.
The activities of one affect the other. That is, the activities of Nike affect the activities of Adidas and vice versa.

Competitors affect business because they are in constant competition and struggle for profit and market share. The moves, decisions, and indecisions of competitors affect business.

1. Customers

The taste and desires of customers are constantly changing. It is the responsibility and goal of the business to keep up with the demands and changing tastes of customers.

This means that customers’ satisfaction is very important to the success of a business and every business that fails to satisfy the customers is sooner than later out of business.

1. Suppliers

Suppliers provide the resources for the production activities of a business. Suppliers affect business because as a source of raw material for production when they fail to supply the business with the needed resources for the production it affects the business’ production and service to its customers.

1. The Culture of the Organization

Every organization has a culture. The culture of the organization could be good or bad. Good or bad in the sense of how it affects the attainment of business goals and objectives. The culture of the organization affects business because it contributes in no small measure to the attainment of business goals.

External Factors Affecting Business

What are the external influences of a business? The external factors that affect business include:

1. Technology

Technology is very important to a business because it determines how well a business does with its production and also marketing efforts.

The development of new technology can drastically affect an industry while creating a new one.

It is through technology that business carries out the production of goods and services. Technology is constantly changing and businesses should make an effort to keep abreast of the latest trends and developments in technology to avoid going obsolete with the use and applications of obsolete technology.

1. Government and its Policies

The activities of government affect business. The priority of the government in a certain area of the economy affects business.

Through government intervention through its agencies businesses get affected. Interest rate and the capital market as well, and other mechanisms and agencies of government affect business.

1. Economic Forces and Elements

The prevailing economic conditions at any point in time affect business. The economic forces and elements which could affect a business are demand and supply and the availability of and cost of capital. During times of economic recession, businesses don’t do well because of the low consumer spending experienced at times of recession.

1. Socio-Cultural Factors

The socio-cultural factors which affect businesses are demand, taste and the preference for certain goods and services at particular times by the consumers.

Socio-cultural factors deal with the values and mores which every society holds dear. In certain societies where certain foods and drinks are not consumed in public, this affects the conduct of such business in that society.

A business should pay very due attention to the socio-cultural factors that can affect it in any society where it operates.

1. International Factors

The world today is a global community. This means that an event in one country can have a serious effect in another country due to the availability of modern transportation and communication methods. The cost of imports and exports also affects business.

Conclusion

In conclusion, we should all bear in mind that business cannot and do not operate in a vacuum. At any time and in any situation, a myriad of internal and external factors affect business and therefore business must operate strategically to ensure it achieves its goals.