The Difference Between Internal And External Influence Explained 

The Difference Between Internal And External Influence Explained

Business plays a lot of roles in our everyday life. It is like the blood that runs through the body. Life would almost be impossible without business interaction. 

People who don’t own a business work for someone or a group of people’s business. Business is one of the reasons people, communities, states, and countries interact.   

A business is anything that provides goods and services to people, such as a restaurant, a cobbler’s shop, a mechanic’s shop, a boutique, etc. There are small and large-scale businesses. Doing business allows the economy to grow and become stronger.

If you own a business and want it to be successful in the marketplace, you have to fully understand the internal and external factors that affect the development of your brand.

Once you know the positive and negative effects these influences have on your business, you know the right strategies to tackle any challenge your business faces. 

What Are Internal And External Influences?

One of the reasons business is so important in our life is because it provides people with job opportunities. Without businesses – buying and selling, almost everybody would be jobless. 

For a business to run smoothly in this advanced world, certain factors need to be determined. The elements are called internal and external influences. 

Internal and external influences affect a business positively and negatively, so a business owner needs to know how to grow or run down his business and take care of any challenge.

Internal influences

Internal influences are anything within the company organization and under the organization’s control, whether tangible or intangible. They can have positive and negative effects on the company.

If one factor affects the company positively, it is referred to as strength. If it affects the company negatively, it is referred to as a weakness. There are several criteria to be considered within the company.

Financial resources:

Financial resources are essential to what your business needs to grow, such as purchasing new equipment. Additionally, operations decisions usually involve significant investment and cost. The company’s financial position (profitability, cash flow, and liquidity) affects its available choices. Obviously, the financial resources necessary to maintain business vary significantly based on the size of a business. For instance, a sole proprietor running a small brick-and-mortar shop might be able to maintain his or her business simply by using a tax calculator and bookkeeping software. Contrary to this, a large corporation may have subsidiaries requiring an entire team of accountants to keep the financial situation under control.

Human resources:

If your business offers services rather than goods, the quality and capacity of the workforce are very important, and they can affect marketing objectives. 

If your business has a motivated and well-trained workforce, they will deliver top-notch customer service and productivity. This workforce will create a competitive marketing advantage.

Organizational structure:

If a business owner wants to have a suitable organizational structure, they must set up a sound working system. 

Whether the system is centralized or decentralized, what matters most is how effective the organizational structure is within the company. 

Every head of a department should ensure that information is widely conveyed to clients and customers. A company should also apply rules and regulations to ensure that the business runs smoothly and the employees are satisfied.

Location influences:

The location of a business plays a vital role in its success. The area you choose to run your business can either make or break it. Your business is significant, especially if the company is retail and service-oriented. 

Your business needs to be seen and recognized by potential clients or customers. So, when starting your business, you have to consider the location. 

Your business must be in an area that has a good image and reputation. It should also be located in a place where potential clients and customers constantly work past. It will be easy to spot your shop or office. 

Also, your business location must be convenient and easy to locate so that your clients can take the time and effort to visit. A wrong location can put potential customers off.

Marketing issues:

The nature of your brand’s product is an essential determinant in the operational setup. Changing the market mix regularly, especially derivatives can place strains on the business operations. 

Operational issues:

Operations play an essential role in enabling your brand to compete on cost and quality. Effective capacity management is also vital in determining whether the brand will achieve its revenue objectives.

Management influences:

Businesses, and how they are run have changed over time, and management is a part of a dramatically changing business. The change has also been effective. Companies had many levels of hierarchy in the past. 

New ideas and issues went through so many levels of hierarchy. But now, how businesses are run has changed. Companies now have fewer levels that issues and ideas have to go through. The result of this change is quicker and more effective decisions.

The change allows the brand to adapt faster and more efficiently to the needs and wants of its clients and customers. 

Business culture:

A marketing-orientated brand is always on the lookout for how it can meet consumer’s needs. If the business has a production-oriented culture, it may lead to the management setting irrelevant or unrealistic marketing objectives.

Corporate objectives:

Corporate objectives are one of the most important internal influences in a business. An operations objective (for example, higher production capacity) and a corporate objective (for example, lowest unit costs) shouldn’t conflict.

External Influences

Unlike internal influences, a business has no control over external forces. The external effects are explained below.

Social influences:

Social influences have a severe impact on how successful a business can be. For example, with time people’s tastes in fashion changes. A company has to adapt to these changes; otherwise, it will be negatively affected by social changes.

If you are into fashion, you must consider all the new changes going around for your business to grow. For example, a sudden shift from wearing skinny jeans to flared jeans.

Another significant social influence is the environment’s impact on the business, wearing away every day. Your brand must always put the environment first by considering what’s in its best interest.

Family-work practices are also another issue. When women give birth, they have to leave work, so a business may temporarily lose an employee, affecting the organization for the time being. 

Competitive situation influences:

Competitive situation influences may be helpful to consumers and producers as well. For example, when two businesses are competing for the best in the market, they lower the costs of their products or services to attract consumers.

When they reduce cost, they will make more sales and profit. This competition also benefits consumers because the range of goods and services will be available, allowing them to get various choices.

Legal influences:

It may seem that businesses can do whatever they want, but legal actions can influence a business and determine what they can or cannot do. Companies must work on adapting to what the law tells them to do or not to do.

Generally, people expect a business to run under the rules and guidelines the law has provided, so business owners must know the law not to breach them and face the consequences.

Geographical influences:

Businesses can be affected by geographical influences in so many ways. For example, Australia is located in the Asia-pacific region, which means that the economic status in the neighboring countries is essential in Australia’s interest.

If China can trade goods and services with Australia, it will create an advantage for the two countries. Also, many Australian businesses are located in the Asia-Pacific region, which means the countries must be doing well economically for the Australian companies to grow.

The country’s demography also has a significant influence on a business. For example, Australian companies must suit people of every age, culture, and sex.

Political influences:

It may seem as if political influences do not impact the growth of a business, but they do. For example, when a country holds a new election, the new government may change things when introducing new policies.

In 2000, the Australian government introduced the goods and services tax. The tax was 10 percent on the supply of nearly all the goods and services used in the country. The policy affected businesses that had to collect taxes for the government. 

Economic environment:

When sudden or short-term changes in demand happen, capacity utilization and productivity can be affected. Changes in interest rates can affect the cost of financing capital investment.

Technological change:

Businesses are undoubtedly affected by rapid technological change which shortens production life cycles and creates opportunities for innovation. When a company is setting marketing objectives, there is the need to consider technology changes.

Financial influences:

Financial influences have an impact on businesses. The businesses can improve the competition between each other when they are financially capable. Even now, because of globalization, Australia can now trade overseas.

Overseas trading has improved the country’s financial sustainability.

Conclusion

In conclusion, success is determined by both outside and inside influences on businesses and how they are run. Both internal and external forces are essential for the growth and development of the company.

A business owner will have to consider all the internal and external influences before making plans, decisions and executing them if they want their business to succeed.

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