Internal & External Influences on Business
Internal And External Influences on Business
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Even though a company idea appears flawless on paper, it may be flawed in actuality. It’s not entirely unusual for a company’s resources, employees, or materials to be the cause of its failures. It may be possible that the company’s surroundings have a negative effect on the business. Having an understanding of how internal and external influences on business can affect it, can help it grow and prosper.
Internal Influences on Business
Factors that a company has some control over includes product, location, management, resource management, and organizational culture.
Product Influences:
A considerable portion of a company’s internal structures and activities are affected by product. The internal structure of a company will vary based on the products and services it offers. For a firm to continue producing its items, it must be able to get the necessary equipment.
Some businesses require less preparatory work than others; for example, service providers don’t need as many resources as manufacturers do to create their products. As a business grows, so does the range of products and services it offers, as well as the access to emerging technologies. As a result, we may deduce that a company’s output is directly proportional to its size.
According to the Sydney Morning Herald’s article titled “Anger at Vodafone,” poor productivity is a problem for Vodafone, as evidenced by the fact that the company provides poor customer service, leading some of its customers to consider switching to another network and therefore take business away from Vodafone.
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Location Influences:
A company’s physical location is a critical consideration in many aspects of its operations. If the firm is located in the wrong place, it might be doomed from the start. For retailing and service-oriented companies, location is critical because they must be noticed and identified by customers. The location of a firm must be taken into account by the owner. It is imperative that the business be placed in an area that has a positive reputation, such as a downtown area, where people are frequently passing by and noticing the shop. Additionally, clients must be able to easily access the business, else they will lose interest and move elsewhere.
Influence of Resources:
There are four primary categories of resources accessible to a company:
- human resources
- Information Resources
- Physical resources
- Financial resources
The company’s personnel are its most valuable resource, making human capital the most valuable of all resources to an organization. For example, a company’s information resources include all the steps it takes to investigate and learn about its current status, such as sales reports. Tools and equipment used to run a firm are considered physical resources. To run a business, a company relies heavily on financial resources, such as money to purchase new machinery.
Management Influences:
There is no denying that businesses and the ways in which they are conducted have evolved tremendously over time. Effective changes have been made to management in the commercial world. Previously, companies had several layers of management and hierarchy through which innovative ideas and challenges had to pass, but lately, owing to a variety of causes such as the impact of globalization on competitiveness, the way businesses are governed has shifted. New ideas and challenges will now be taken more effectively and efficiently, allowing the firm to put more emphasis on how it operates in the long run, as there are fewer layers of approval. Since there are very few managers involved in decision making process, companies are able to respond to shifting customer preferences faster and more appropriately.
Business Culture:
Every company has its own unique set of values, beliefs, and principles, which are shared by all of the company’s employees and executives. The behavior and results of a company reveal a lot about its culture. The rules and regulations of a firm, such as how employees are required to dress and conduct themselves, are often a reliable indicator of a company’s culture. To get the best out of employees and consumers, organizations must embrace culture as an essential tool. This can be seen in the film Australia’s food fight: West Farmers v Woolworths. Because of the culture shift brought about by the company’s new leadership, Coles has gained an advantage over Woolworths and is currently doing better than it ever has before in the marketplace.
Businesses in Australia are significantly affected by internal factors. Every aspect of a company’s operations is considered, from its location to the way it operates. To be successful, a business must be positioned in a place where customers can easily access it and where it can be seen by the general public. Customers may not be able to visit to the store and make purchases if it is not situated in an accessible place. If a firm is to be successful, it must have a well-managed management team and take the required steps when necessary, such as cutting staff if the company is unable to meet its financial obligations. Thus, it is vital for firms to be positively impacted by internal factors.
External Influences on Business
It can be hard for businesses to control the things that happen outside of their control. These things include: Economic and financial factors as well as factors like where a business is and how it interacts with other businesses, people, and the environment.
Economic Factors
Economies throughout the world go through ups and downs, just as in Australia. There are ups and downs in these cycles (recession). As a result of the increased employment levels in the economy, businesses may raise the prices of their products to boost their profit margins. During economic booms, employees’ pay tend to rise since the company is making more money. Economic crashes do have its downsides, such as when the economy goes through a crisis. Recession have the unwanted effect of lowering employment rates since businesses are unable to maintain their staff due to a lack of sufficient sales income. Increasing prices may not be an option due to the lack of demand, thus companies may be forced to decrease their pricing even further in order to keep up with the competition. Articles such as “Petrol prices climb, no relief in sight” highlight the impact of economic variables. Since the economy is so bad, prices have gone up, and some people may not be able to afford gas at these levels anymore. Another economic impact may be noticed in the radio report “the impact of floods on supermarket prices.” A loss of earnings for farmers is a loss for the economy.
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Financial Influences
There are several ways in which financial forces might affect a corporation. Deregulation, or the elimination of government control in an industry, has allowed businesses to compete more effectively with one other. It is even better because of globalization since Australia can now export its goods, boosting the country’s economic viability even more.
Geographical Influences
A company’s success is influenced by several factors, including its location. Because of Australia’s geographic location in the Asia-Pacific region, the economic health of its neighboring countries is of critical importance to the country. To put it another way: if China does well, it may be able to trade with Australia, which would benefit both countries. Since many Australian firms have operations throughout the Asia-Pacific area, that region’s economies must be strong if those firms are to continue operating. For example in Australia, companies must be able to cater to individuals of many ages, cultures, and sexes in order to be successful. With an ageing population, institutions for the elderly will be an increasingly important part of Australian life. Additionally, when baby boomers begin to leave the workforce, younger workers will be called upon to fill the void left by the departing workers. Because of globalization, Australia is no longer restricted to trading products and services only within the country but must also figure out a way to do so throughout the globe as a whole. In the movie “picking up an Aussie apple,” we observe that Australia is beginning to import abroad apples to Australia, which shows the influence of globalization.
Social Influences
The success of a firm is heavily influenced by social factors. Things like people’s taste in fashion and current trends will shift over time. These developments might have an extremely detrimental impact on firms if they don’t adapt. In order for a company to be successful, it must evaluate all of the current fads and trends. As our ecosystem degrades at an alarming rate, businesses must constantly keep the environment in mind while making decisions, such as not handing out plastic bags after every transaction. It’s important to keep in mind that when women give birth, they must take time off from work, which might have an impact on a company’s productivity. “Petrol price increases with no respite in sight” is an example of social influence in action. In light of the rising cost of fuel, many individuals may prefer to take public transportation or ride a bike to work instead of driving.
Legal Influences
Businesses aren’t allowed to do anything they want to do. When it comes to company, there are a number of laws that dictates the do’s and the don’ts. Because of the ever-increasing list of rules, companies have to adjust their operations to adhere with all of those laws. People in a society generally expect firms to operate in accordance with the norms and regulations set out by the government. Businesses must be informed of all applicable laws in order to avoid breaking them and suffering the consequences.
Political Influences
Despite the fact that political effects are not the most influential variables on a firm, they nonetheless have a significant impact. For example, if a new government is elected, it may implement new rules. The goods and services tax, implemented in 2000, imposed a 10% tax on the supply of the majority of products and services used in Australia. This impacted companies by requiring them to collect taxes on behalf of the state. There has also been a recent trend of deregulation, which is a reduction of government control in businesses, which reduces the burden on firms and allows them to compete more effectively.
Institutional Influences
In addition to government and regulatory agencies, trade-unions and employer groups impose significant influence on businesses.
- Government
- Regulatory bodies;
- Employer Associations;
Technological Influences
Technology has unquestionably had a major impact on business. Businesses can only benefit from the constant development of new technology, which can only lead to increased production and efficiency. In the long run, the cost of productivity is reduced because there are no employees or wages to be paid for the employment of robots. As a bonus, robots free up human workers from tedious, monotonous tasks. As technology has advanced, it has become simpler to connect with suppliers and customers without their having to physically be there. Keeping up with or even outpacing rivals requires businesses to employ all available technology to its maximum capacity.
Competitive Situation Influences
For example, when two companies are fighting to be the market leader, they would cut the costs of their inventory in order to attract customers. Because they’ll have greater sales and profits, this is a win-win situation As a result of increased competition in the market, customers have more options to choose from when searching for the product/ service they desire. This really is excellent news for everyone involved, including consumers.
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