What Are Internal & External Environmental Factors That Affect Business

If a business wants to be successful in the marketplace, it is necessary for them to fully understand what factors exert impact on the development of their company. Once they know about both positive and negative effects within and outside the company, they can produce suitable strategies to handle any predicted situation. Therefore, examining internal and external factors is considered the most important task for an enterprise before launch any strategic marketing plan.

Table of content

  • Internal impacts
    • Human resources
    • Capital resources
    • Operational efficiency
    • Infrastructure
    • Innovation
  • External impacts
    • Economic situation
    • Laws
    • Surrounding infrastructure
    • Customer demands

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Internal impacts

The internal factors refer to anything within the company and under the control of the company no matter they are tangible or intangible. These factors after being figured out are grouped into strengths and weaknesses of the company. If one element brings positive effects to company, it is considered as strength. On the other hand, if a factor prevents the development of the company, it is a weakness. Within the company, there are numerous criteria need to be taken into consideration.

Human resources

It can be said that human element is among the most important factors that internally exert impacts on the growth of the company. The employees can be either a strength or weakness of the company depending on the level of practical skills, attitudes toward work, and so on. For example, if a business has skillful and motivated workers, they are sure to be the biggest asset of this enterprise. Conversely, employees without carefully trained and have negative attitudes to their task will be an enormous challenge for the company to address.

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Capital resources

Of course, money is the vital part for any enterprise to perform its plan. No company can survive without having capital resources. Once a company has enough budgets, they can easily launch their projects and expand its scale. There are also several ways for an enterprise to maintain stable budgets by some resources such as investment opportunities, funding, and annual income.

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Operational efficiency

The way an enterprise operates directly affects their success in the marketplace. The operation of a company includes a bundle of contributing factors such as products, employees, customers. The business owners need to fully understand how their products manufactured, how it is consumed and favorable by consumers, how their employees perform their tasks, what improvements need to be made, etc. Only when the operator truly knows level of efficiency the company is, can he thinks about appropriate adjustment methods to handle all current problems.

Organizational structure

To have a suitable organizational structure requires the owners have to consider carefully set up a system to work smoothly within the company. Whether it is a centralized or decentralized system, the most important thing is how effective the structure is when applied for the company. The heads of departments need to make sure that the information flow is widely conveyed to all customers. Suitable rules and regulations are being applied to ensure the benefits of employees, and the business as well.

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Infrastructure

When you already have well-trained and motivated workers, an effective operational and organizational system, make sure that the infrastructure of the company are good enough for all your functions. With the modern and high quality facilities, stable power, internet and wifi connection, and so on your company is likely to perform better. In other words, the better your infrastructure, the more opportunities for your company to perform successfully.

Innovation

With the fast pace of the fourth industrial revolution, the world is on the ways to strongly change the life of people including how they work, they communicate with each other. Therefore, each company also needs to innovate themselves firstly to keep up with the development of the whole world and secondly to make themselves outstanding among competitors. Innovations can be taken in manufacturing process, organizational structure, or even infrastructure.

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External factors

On the contrary to internal factors, external elements are affecting factors outside and under no control of the company. Considering the outside environment allows businessmen to take suitable adjustments to their marketing plan to make it more adaptable to the external environment. There are numerous criteria considered as external elements. Among them some most outstanding and important factors need to listed are current economic situation, laws, surrounding infrastructure, and customer demands.

Economic situation

Economy is one of the most determining factors to the success of the company even though it is an external element. Within the economy, some contributing factors such as the fluctuation of interest rate, economic crisis, and so on directly and strongly affects the consumption of buyers, and consequently, the profits of businesses.

Laws

The rules and regulations from local government play an integral role in the development of the company. There are some countries which their laws prevents the development of some certain industries. That can be a threat to the company. On the other hand, some industries receive positive and continuous support from local government via their rules and regulations. Besides, if the laws allow organization outside the countries invest in local industries, they will indirectly create an enormous source of financial support for local companies.

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Surrounding infrastructure

Depending only on inside infrastructure is not enough for the company to develop. If they have a well-structured and modern infrastructure, but the road to access the company is not well created will be deterrence for the business. They will find trouble in delivery method and looking for a collaborator. Especially, if your company manufacture hi-tech devices; however, the outside infrastructure is not suitable to equip these devices, it would be a big challenge.

Customer demands

We all know that what people want, what people need, and what they demand are usually different from each other. Customers need something to communicate with their family member outside their countries, they want to a smartphone which can perform multi-function; however, they cannot afford that smartphone with a limited budget. Therefore, their demand is just a typical phone which can perform basic functions. If your company is not able to figure out what are your customer demands, you will face difficulty in how to make your products consumed by customers.

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In conclusion, there is a bunch of contributing factors the success of the company which comes from both outside and inside a business. Either outside or inside factors are of utmost importance for the development of the company. If a business hopes to perform smoothly and successfully, they need to take all these elements into consideration before making any decision.

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