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Internal and External Factors of Business

Factors of Business Free Essay

Internal and external factors play an instrumental role in the performance of any business. The focus of this assessment is the effect of internal and external factors on businesses in the retail industry. In tandem with the environmental scan, the common internal factors that affect the business in the retail industry include employees, the company leadership, and the organizational culture. The external factors that affect the operation of the industry include competitors, political-legal environment, and socio-cultural, economic, and technological factors. However, the effect of these factors could be easily addressed using the relevant factors from the SWOT analysis. Strengths specifically address internal factors while opportunities play a vital role in addressing external ones.

Current essay explicates the internal and external factors affecting businesses in the retail industry and the relevant strategies to address them.

Internal Factors

The environmental scan revealed that employees and the leadership affect the operation of any business in the retail industry. Craig and Campbell (2005) confirm that employees have both positive and negative influences on the success of the business depending on their level of skills and knowledge and motivation. On the other hand, the type of leadership style used within the organization determines the kind of decisions made for the success of the business in the retail industry.

In light of this understanding, one of the most significant things that needs to be done to climb the corporate ladder in the retail industry is to continuously train employees with the available resources to equip them with relevant skills and knowledge for job performance. Worthington and Britton (2009) reiterate that employees would deliver on the goals of the organization in cases where they are perfectly trained to respond to the changes in the workplace. The availability of the training capabilities is a strength in the business and will be crucial in climbing the corporate ladder.

Another vital strategy that would help the business in the retail industry climb the corporate ladder is offering employees appropriate financial incentives to motivate their performance. The business has a strong financial base that would help in improving the compensation of its employees, hence influencing positive performance which is crucial to gaining a competitive advantage in the industry.

The last significant strategy that would help the business climb the corporate ladder is to ensure individuals that leadership is of high integrity, accountable, and transparent in their overall activities. With the strong vetting processes in the organization, it would be easier to develop a strong leadership position for the organization, thus enabling it to climb the corporate ladder. According to Craig and Campbell (2005), strong leadership would ensure that correct decisions are made within the required time, hence improving the competitiveness of the business in the retail industry.

External Factors

External factors are also referred to as non-controllable factors as the business does not have direct control over them. The first significant factor that currently exists in the retail industry is competition. The industry has many businesses that provide similar services and products to their customers, thus leading to high competition. Palmer and Hartley (2011) emphasize that competition influences the future state of the industry in terms of the quality of goods and services offered. Different businesses would be looking forward to attract customers by providing quality products. Again, competition impacts the future of the industry in terms of the prices charged. Every business would want its products and services to be consumed at the most affordable prices. Notably, stiff competition would affect long- and short-term goals of the business as it has to adjust to what other similar businesses are doing. For instance, it affects both short- and long-term profitability because the business has to charge lower prices to attract more customers and remain relevant in this competitive environment. Worthington and Britton (2009) affirm that stiff competition would be handled by utilizing the available opportunities of committed and potential customers. Quality products would be offered to customers at affordable prices to increase their loyalty and retain them in the business.

The second vital factor that currently affects the industry is the economic situation. The changing economic conditions influence the retail industry in all aspects. Craig and Campbell (2005) opine that declining economic conditions affect the future state of the industry because they tend to reduce the purchasing power of consumers. Most consumers buy products depending on their ability to afford financial resources. Long-term and short-term goals are also influenced by the prevailing economic conditions. The business would not be able to achieve its long-term and short-term levels of profitability in instances where the economy is not performing as expected. Losses are usually realized in both the long term and short term because of the inability of customers to purchase the existing products. The best strategy to deal with undesirable economic conditions is to maximize the available opportunities of expanded markets. Diversification would be the best way forward to ensure that all market segments are served at the best price possible.

The last significant factor identified through the environmental scan is technology. Technology is one of the factors existing in the industry since most businesses aim at automating their operations. Accordingly, technology would affect the future state of the business positively as it would lead to efficiency in the delivery of services by different businesses. Palmer and Hartley (2011) state that customers would be able to enjoy automatic services and quality products because of the technology utilization. Technology affects both long-term and short-term business goals through the improvement of efficiency. The business would be in a better position to operate efficiently and improve the quality of its products both in the short term and long term with its ability to respond to technological changes in the industry.


In conclusion, the controllable and non-controllable environment affect the operations of businesses significantly. Internal factors could be effectively controlled by the business. For instance, employees could be controlled through effective training and appropriate financial incentives to motivate them. On the other hand, the kind of leadership available could be controlled through the vetting process that leads to the appointment of well-qualified individuals with high integrity and accountability. External factors such as technology, economic factors, and competition affect both long-term and short-term goals of the organization depending on their nature. It is vital for every business in the industry to identify these factors and try to manage them effectively for the industry success.

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