The company operates in an environment that can be, to some extent, predictable or not. Indeed, external and internal factors can change rapidly and influence daily operations. This article reviews the internal and external factors that an entrepreneur should be aware of.
What are the internal factors that affect the development of a business?
The internal factors of the company represent the agents that can have a positive or negative impact on the macro environment definition of the company. Generally, these are parameters on which the organization can exert a high degree of control. It is important to identify these factors in order to strengthen those that contribute to the organization’s good performance and to eliminate or reduce those that negatively affect it.
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Financial resources
These are assets that have a certain degree of liquidity (cash, lines of credit, stocks, etc.). Poor management of this factor can lead to the suspension of payments to suppliers, wages, or short-term loans, thereby jeopardizing the operation of the company.
Human resources
They are considered the main asset of the organization. You should pay attention to indicators such as internal staff turnover, layoff rates, productivity, average time to achieve goals, among others.
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Technological resources
The company must stay up to date regarding the use of technologies. Technological lag can lead to a significant increase in costs that may result in a loss of market share.
Product or service
The costs associated with producing a good or service are internal factors that must be taken into account for the success of the business. A high cost, resulting from poor administrative or operational management, can generate a price higher than that of the competition.
Internal systems and procedures
These are the systems for production, personnel, marketing, accounting, finance, etc. They constitute the set of policies, practices, procedures, and processes used in the development and implementation of an organization’s core activities.
Internal relationships
Interpersonal relationships, internal communication, or employee motivation, among others, are key factors to measure in order to understand the work climate of the company. It is important to maintain a high degree of motivation and to identify internal communication issues, primarily those that are not expressed in words but through gestures and actions.
The external factors that affect the development of a business
External factors are parameters outside the direct sphere of the company but are an integral part of its life.
Suppliers
Suppliers are a strategic partner for the organization, as they provide the inputs that will allow our organization to produce the goods you want to market. A shortage or delay from your suppliers would significantly affect the production process.
Customers
Customers are the heart of the business, without them the organization cannot survive. It is necessary for the company to understand consumer needs in order to offer products or services that are accepted by the market.
Competitors
Competitors are an important force that pushes you to offer better products with the best value for our customers. It is about winning consumer preference by surpassing other companies in the market.
The government and laws
The government and laws that are established influence business operations. These are the laws of a country that govern what a company can and cannot do in a given territory.
The general environment
In the aspect of “general environment,” one must consider the economic environment, capital, labor, price levels, technological changes, social changes, inflation, and political changes.
Controlling capital, assets, and liabilities, in order to know the limits or potential of our operations in a given area. It is also important to know the capacity and cost of your workforce in order to calculate the form of work that must be established to achieve the organization’s objectives.
It is necessary to take into account technological changes, as technology offers great competitive advantages to organizations that know how to first integrate new devices and methods to optimize production processes.