EXTERNAL FACTORS
External factors are those factors which are external to the business organization and cannot be controlled by the management. But in order to sustain in the industry and the market every firm has to manage these factors. The success of a strategic business unit depends on its ability to react timely to change in the external environment. A company having good organizational strategy will always alert to these external factors and will make measure to control them on time always. Major external factors include economic conditions, market, technology, climate change, legal, media, political and demographic factors.
Factors in the external environment and its management
1. Demographic Environment
Demographic environment includes
As for external factors one of the external factors would be perhaps a new law that is given and affects directly or indirectly the business and that business needs to make some changes.
A business does not operate in a vacuum.It has to act and react to what happens outside the factory. These factors that happened outside the business are known as external factors or influences.
When manipulating a business’s strategy, it is important to focus on the external factors in the environment. An external analysis is where a business conducts environmental scanning that present a company with the key external forces influencing the organization. The facets of external forces examined are the business environment, remote environment, or the competitive environment. A business environment is all of the external factors in the general environment that a firm cannot control, but can affect their strategy. The remote environment is the forces that affect most firms. Lastly, a competitive environment is the firm’s specific industry and its entirety. The external analysis is pertinent to a company called Dick’s Drive- In; without it, Dick’s would not be a thriving popular business today.
The forces that drive changes in an organization are classified as internal and external forces. Internal forces of an organization pertains to events, factors, people, systems, structures, and conditions inside the organization that are generally under the control of the company such as the mission statement, organizational culture, and style of leadership. On the other hand, external forces are those factors that occur outside of the company, which could result to a change inside the organizations and most of the time beyond the control of the company such as customers, competition, the economy, technology, political and social conditions, and resources (Hartzell, 2017).
External environmental factors are the macro environment affecting a business; they are factors outside the company and which they have no control over (Kotler & Armstrong, n.d.) these external factors bring about impacts to the company thus a company should always be prepared to react.
The CEO of this company began to take steps into making the company better. Both external and internal driving forces drove this change. The definition of these two terms needs to be looked at in order to understand what they were. External factors are the factors that occur outside the scope of the company or organization, for example, the economy. These factors are outside the influence of the company (Lindbald, 2014). On the other hand, internal factors are factors that occur within the scope of the organization and are within the control of the company.
The external environment affects a firm’s strategic actions. Essentially, if a company decision has created a disaster in the environment, they
Internal factors are those that can be addressed within the organization. This would include conditions that might be addressed by operating procedures and/or management decisions. Management teams will be most effective in working in this area: perfect example is Southwest’s Tuesday meetings. External factors are those over which you have little influence, or are not in a position to change, but which have a direct influence on the success of your business: in this case, Continental Lite and Shuttle By United.
The thesis of the story is external factors as well as bad personal decisions all contributed to my school problems. I believe the examples he gives to be pretty explanations for his school failure. He talks about how his mom never motivated him to do his homework or study, and I believe parent's pushing their kids gives the kids a lot more motivation to do well. I know that my parents always nagged me to read and checked my homework every night as a kid and the habit of doing the work just in case they checked it stayed with me. Another factor he mentions are his friends didn't care about school, so he didn't care either. You see that a lot in high school because students depend on their peers for acceptance. For example, my old friend dropped
Internal Factors: Internal factors are the factors within the company, which affects the success and operation of business. The company can control these factors. Effective internal management is the key to the successful business.
These factors influence the internal environment of an organisation and they help in identifying the past and the present of the company, It also provides a frame work for reviewing strategy position and direction of the company.
External factors are those that affect business from outside the organization. There are several external factors that affect the outcome of day to day business, even for a huge corporation like Disney. Walt Disney has been known for its family entertainment for more than eight decades. It started small in the 1920s and has grown phenomenally today to a global corporation. Even a business this powerful and profitable is affected by external factors.
In order to build a successful business model, the organization must analyze the business environment for external forces. Osterwalder and Pigneur (2010) discuss the importance of understanding the external factors in the business environment when developing a business model; the organization must be able to adapt quickly to the changing environment. External factors of demand play a critical role in developing a business model, an organization must quickly identify external threats and opportunities to stay competitive. External factors include: competition; legal and ethical; economic and socio-economic; political; and technological. Industry competition is an external factor that firms must carefully monitor to ensure that the organization is creating customer value through better product/service offerings and cost savings. Mapping the external forces can help an organization see future trends that may be disruptive to the current business model so that the organization can take a different direction to achieve their goals (Osterwalder & Pigneur, 2010, p. 200).
An analysis of the external environment includes the factors in a business’s external environment about a business's industry, competition, and political and social environments, and affects the firm’s strategy (Aaker, 2001).
Many factors shape and form the operations strategy of a corporation, for example, the ever increasing need for globalizing products and operations and thus reducing the unit cost, creating a technology leadership position, introducing new inventions, taking advantage of mass customization, using supplier partnering, and looking for strategic sourcing solutions. All of these factors require an external or market-based orientation; these are the changes that take place in the external environment of the company.