Internal Factors Affecting Businesses: Understanding The Key Drivers

Internal Factors in Business

Discuss about the Internal Factors Affecting Businesses for Internal and External.

Successful business owners keep track of the challenges affecting their enterprises and develop means towards resolving issues. In organizations, there are two types of factors including internal and external ones that affect business processes. External factors involve factors beyond the ability of business owners while the internal factors involve those within organizations where the business owners have control over them. While external and internal factors affect business, internal factors remain key to development as they can be easily controlled since the owners have the power to control it.

Internal factors are those which can be changed through policy implantation by the business owners. In this case, the power resides with them as opposed to an external environment where one has not alternative other than adhering to the demands. Therefore, it is important for businesses to understand the internal environment and how it places them towards success. The business owner needs to position themselves and equip their firms with the latest technology to guarantee the best outcome during operations (Adams, 2002).

Internal factors refer to the activities that businesses do within the organization that affects the way businesses are run. In this respect, they result from the day to day practices which can be controlled. For instance, aspects such as business image, creditworthiness, and business reputation depend on the business owners who make critical decisions in business (Carroll & Buchholtz, 2014). Several factors affect the manner in which businesses are done which result from the operations of organizations. Such factors and processes can be changed according to the preference and decisions of business owners.

Furthermore, the internal factors determining a business operation include financial resources present such as funding, sources of income for development, and investment opportunities all which can be controlled by the owners (Crane & Matten, 2016). Secondly, the physical resources represent internal factors including a firm’s location, invested equipment for work, and the facilities present for use.

Besides, human resources act as internal factors which determine production capabilities and are important in attracting consumers for products on sale (Lussier & Corman, 2015). Lastly, employee remuneration programs, departmental hierarchy, and software systems which ease jobs. All the factors mentioned above determine organization success and are controlled by the owners. In this case, a change in any of the factor can be done by the shareholders towards posterity.      

Owners

The internal environment entails organization’s owners, employees, the board of directors, and the culture present in an organization. Therefore, internal business environment entails factors within organizations which impact success or failure depending on the style and approach used by a given management. It is, therefore, important for organizations to recognize the potential opportunities existing and use the internal control measures to guarantee success.

Owners refer to the people who have invested their funds into the setup of a company and have a significant influence on the direction a company takes. Business owners have the responsibility to make decisions based on the resources in place. The right to leadership style remains with them as long as one understands the repercussions attached to a given leadership style. Owners include individuals who hold shares in a company or that pioneered the development of a product in a company. Board of directors refers to the governing body of a company who are involved in the daily decisions of a firm. The board has the responsibility of overseeing the management appointments which control the decision-making ability.

Employees are a valuable asset in firms as they guide and carry out daily activities which shape the profitability of businesses. In this case, they remain significant factors in performing duties thereby acting as influential factors to the internal environment. A stunning performance from the individuals leads to higher productivity whereas a decline in the same damages the revenue flow in organizations (Anitha, 2014). Employees when managed properly initiate positive changes to organizations and are therefore a controllable entity towards success.

Organization culture remains vital in determining the overall behavior of employees and serves as an internal factor in development. Organizations with a proper culture that promote hard work lead to success as opposed to a culture that promotes laxity in organizations. Understanding an environment is essential in determining the best practices towards success. Groups differ according to their culture where some have a proper communication whereas others survive under a dictatorial leadership which cultivates the aspect of fear in the workplace (Korschun, Bhattacharya & Swain,2014). Consequently, the organization with the best culture remains profitable as employees are better placed to develop.

The financial risks in a business determine the level of progress an organization achieves. The ability to plan one’s financial plan remains under the control of business owners who control the transactions made as well as the financial systems in organizations. Therefore, the financial operations represent the internal factors that affect the decision to hiring or relieving employees off their services. Firms need to properly contain their financial operations and remain accountable in their expenses to yield profits and prepare their accounts open to the auditors. Poor planning leads to losses and lack of transparency which leads to bankruptcy.

Employees

Employees in organizations form a significant part as they remain charged with the day to day operations. Employees are internal factors that determine the direction of organizations. Workers who remain motivated at all times tend to drive organizations to success. Therefore, they serve as crucial factors to the success of the business. Employees who receive adequate pay and a constant appreciation for achievement made tend to increase the production of a firm thereby determining their success. Employers might be wealthy but failing to transfer the benefits to the workers results in a limited production (Zikmund, Babin, Carr & Griffin, 2013). The situation represents a case where the employee status remains essential towards the success of organizations.  In this respect, the category falls within the internal category given the fact that it can be controlled by the owners and other stakeholders to success.

Leadership is one of the internal factors that affect organizations depending on the ability and approach used in providing direction. Businesses with a formal structure of business complete with the mission and vision attract success. However, businesses working without such guide in business tend to lose a lot in achieving benefits and competing favorably with other businesses within the same industry. For instance, business leadership that value employees and puts their interests into consideration tend to thrive as opposed to those with improper affection on employees registering little success. Besides, leadership depends on communication effectiveness which determines the level at which employees respond to business activities.     

Organizations have differing organizational structures and operational procedures which determine the internal influence on businesses. For instance, organizations with a digital supply chain are better placed to plan and forecast the demand ratio of consumers and avail sufficient product numbers in their stores (Samaha, Beck & Palmatier, 2014). Besides, organizations embracing proper technology use enhance efficiency and consequently promote their profit margins.

On the other hand, businesses cannot decide on huge marketing over the media without a proper financial standing (Cooper, 2015). In this case, the internal factors determine the level of decision making and the success present in organizations. Therefore, such factors remain within the control of groups where an improvement can result in positive changes and success.

The rate at which businesses undertake changes is determined by the organizations’ leadership. In this respect, the internal factor remains free from the influence of the external environment but rather the internal administration.  Notably, it is common to see some organizations remaining profitable while others are closing up shops. Such differences arise from the innovative nature of businesses in maintaining profit making. In this case, business dealers have the ability to determine the extent to which they can be innovative and explore the avenue towards achieving success (Nadolska & Barkema, 2014). Therefore, innovation is an internal factor that affects the way businesses run and the decisions made in organizations.

Culture

Internal factors in organizations determine the level of success and the competitive nature of organizations. Several facts such as brand recognition remain internal elements that can be created by business owners. Employees remain important in organizations who if treated well results in a positive development (Zsambok & Klein,2014). The resources in a company are a preserve of the owners who determine what to introduce towards success. The adoption of technology and innovation places firms ahead of the rest. In this case, organizations have the freedom to select their methods of production towards encouraging competition.

Besides, business decision-making ability rests with the owners and the board of governors who are responsible for making key decisions in markets. Moreover, the resources and human workforce in an organization determine the type of business decisions to take based on the need for expansion (Graham, Harvey & Puri, 2015). For instance, the financial projections of a firm would be used to arrive at expansion decisions which rest with the board of directors and business owners.

Therefore, the internal factors determine the level of success and the type of decisions to be taken by the management based on the resources available. Businesses need to equip themselves with the latest technology and managerial concepts to assist them in aligning their resources to the expected revenue projections. The internal environment remains instrumental towards steering business success.

References

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Carroll, A., & Buchholtz, A. (2014). Business and society: Ethics, sustainability, and stakeholder management. Nelson Education.

Cooper, D. (2015). Effective Safety Leadership: Understanding Types & Styles That Improve Safety Performance. Professional Safety, 60(2), 49.

Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

Graham, J. R., Harvey, C. R., & Puri, M. (2015). Capital allocation and delegation of decision-making authority within firms. Journal of Financial Economics, 115(3), 449-470.

Korschun, D., Bhattacharya, C. B., & Swain, S. D. (2014). Corporate social responsibility, customer orientation, and the job performance of frontline employees. Journal of Marketing, 78(3), 20-37.

Lussier, R. N., & Corman, J. (2015). A business success versus failure prediction model for entrepreneurs with 0-10 employees. Journal of Small Business Strategy, 7(1), 21-36.

Nadolska, A., & Barkema, H. G. (2014). Good learners: How top management teams affect the success and frequency of acquisitions. Strategic Management Journal, 35(10), 1483-1507.

Samaha, S. A., Beck, J. T., & Palmatier, R. W. (2014). The role of culture in international relationship marketing. Journal of Marketing, 78(5), 78-98.

Zikmund, W. G., Babin, B. J., Carr, J. C., & Griffin, M. (2013). Business research methods. Cengage Learning.

Zsambok, C. E., & Klein, G. (2014). Naturalistic decision making. Psychology Press.