Internal and External Factors of Business Environment
The internal and external factors influence business decisions, strategies, and operations. Internal factors are tangible and intangible assets and aspects within the business that influence its approach to operations. The business maintains considerable control over these factors, therefore, can alter them for its success. This does not imply that these factors do not pose a challenge to the management, they as much complicate decision making in business organizations as the external factors. Internal factors include the structure and culture of the business, human resources, physical assets, and cash flow. External factors are outside influences that the business has to either contend with or harness the opportunities they present for its success. They impact business decision making by affecting investment decisions and strategies developed for business growth. The extent of control that business organizations wield over these external factors is completely diminished when compared to the level of control over internal factors. External factors include competition, political influence, climate, economy, technology, etc. importantly, businesses efficiency is measured by the ability to align their strategies such that they optimize the internal strengths and external opportunities available while at the same time minimize external threats and internal weaknesses (Dragnić, 2014).
Impact on Global Strategy
Global businesses have a far tougher responsibility in maintaining a competitive advantage in a vast environment that is affected by numerous dynamisms. The external environment on the global front is far less forgiving due to additional factors such as changes in the global financial markets, government policies, and political instability. Business decisions must, therefore, aim to cushion against these negative external influences. Branding strategies play a vital role in eliciting interest in the company’s name in global markets. Coupled with good quality products and services, branding in the global market is vastly exploited albeit with high success. Investments in the market and consumer analyses also guide business on the best strategies to implement and gain success. Inversely, the global environment also offers opportunities such as new markets that facilitate business expansions and growth.
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Similarly, businesses have to adapt their internal strategies to compete favorably on the global market. The global market offers a great number of potential employees with the best talent and skills to enable the business to succeed. Tapping on this exemplary talent requires the adoption of recruitment policies that suit the company’s goals. Furthermore, the business structure should be designed to ensure proper coordination and easier decision making. Thus, employing the best practices both in the internal and external environment with regard to global strategy creates a recipe for success.
Internal Focus
Businesses’ internal factors are often assumed to be easier to alter or exploit to achieve on the global market. However, this is not the case considering the challenges posed by globalization and other factors such as global financial market that undergo perpetual changes. Decision making should be guided by research and knowledge of the internal business environment on the global market.
Structure and Culture
The structure of global organizations relies on the product or service offered, the size of the organization and management decisions on the most suitable structure. The best structure for global business should portray the characteristics of simplicity, flexibility, innovation and a unique ability to meet the rising needs of customers at every level and market (Baronchelli & Cassia, 2014). Three main structure is adopted by global businesses, the divisional structure, functional, and hybrid structure. Divisional structure allocates different sections of the company's activities to various divisions within the company. Divisional structured companies are highly flexible since the divisions can be either product oriented or geographically oriented. This structure also eases decision making by allowing each division to be self-sufficient. The functional structure is adopted for businesses that prefer specialization of skills in their workforce. The structure allows different functions within the organization to be carried out in a single section. For instance, all accounting jobs are channeled into one section. The hybrid structure is a combination of two or more structures. This structure seeks to match the resources of the business to the structure. Consequently, a high performing is adopted that enables the business to compete globally effectively.
Business cultures are unique behavior, attitude and ways of interaction within the business that define its strategic direction. Business culture is always not written down but is a determinant of the business success on the global market. The attitudes and perspectives of employees influence their views on the company’s success and ability to work in achieving the perceived success. Culture is also related to employee and customer satisfaction such that a contented workforce is willing to work towards meeting the company’s goals. Positive attitude propagates quality customer service which then leads to client satisfaction. The business culture must also align with the expectations of the consumers in the global markets which then influences consumer attitudes towards the business.
External Focus
The external environment on the global front is both beneficial given the opportunities offered and challenging due to the threats. Strategies must aim to utilize the opportunities available while at the same time reducing the threats.
Customer Preferences, Competitors, and Politics
Customer needs and preferences are always changing even in the global environment. Adaptability to these needs is key determinant of the business’ ability to succeed in this environment. Strategies to adapt the products and services to these changing needs involve carrying out consumer research in these markets. Competitors also pose a challenge to global business especially in markets where stiff competition pushes revenues and markets to almost unsustainable levels. Identifying a niche and exploiting it to gain a competitive advantage helps businesses to avoid being pushed out of the market (Savrul, Incekara & Sener, 2014). Product differentiation is also crucial in such markets since it aids in establishing a unique customer base that has the potential to grow. Differentiated products also eliminate direct competition with other established players in the market hence playing to the company’s success. The political environment of various countries is always shifting according to policies and social factors. A stable political environment can possibly shift and become hostile within a very short period owing to changes in policies. The fact that businesses have no control over these political environment poses a further challenge. In light of that, forecasting on the direction that the political will take facilitates the implementation of precautionary measures. Strategies may involve market exit to avoid losses or seizing operations until the environment becomes favorable.
Apple Inc.
Apple is a multinational corporation specializing in the manufacture and sale of electronics, software and offering online services. Apple built its global image through branding is valued among the most valuable brands in the world. Owing to the type of services and the products that Apple offers, it faces stiff competition from other established brands such as Samsung and other smaller brands. The success of Apple over the years prompts an analysis of its internal and external environment.
Internal Environment
Apple’s success is built on the innovative nature of its products and services. This assertion is evident in the company’s mission statement to offer innovative hardware, software and internet services (Apple, n.d). The company makes major investments in an innovative workforce that can design products that set them apart from others in the market. Apple is also among the most valuable brand names in the world. The company was able to achieve this by offering excellent quality products over time. Their ability to introduce new products in the market and offer unmatched customer services also sets them apart in the global market. A strong financial base that facilitates investments in almost all continents is an added advantage (Apple, n.d). The company's financial position enable strategies that exploit new markets through investments that eventually have high returns. Unsurprisingly, Apple's weakness is visible through the high prices for its products. The company compensates for this downside by offering high-quality products and services and engaging in aggressive marketing strategies.
External Environment
Apple operates in an industry that is extremely competitive. Technological advancement coupled with new entrants pose major threats to the company. Hence, Apple’s decision to differentiate its products enabled it to acquire a market niche and maintain a substantial market share. From a different perspective, the technology industry is rapidly growing especially with the continued increase in internet accessibility. Thus, investment in online services is expected to increase the company’s revenues for years to come. Greater opportunities are also offered by technological advances that enable the company to produce better quality products at reduced costs. New markets for the company’s products also offer opportunities that the company exploits to increase revenues and boost profits. Additionally, Apple’s marketing techniques contribute to its favorable position. The companies invest in marketing research to identify consumer preferences then aligns its policies to meet these needs. As a result, its new products have specific target markets and have guaranteed success.
References
Apple. (n.d). Company Overview. Retrieved on July 2018, from https://www.simpletense.com/assets/files/apple.pdf.
Baronchelli, G., & Cassia, F. (2014). Exploring the antecedents of born-global companies’ international development. International Entrepreneurship and Management Journal , 10 (1), 67-79.
Dragnić, D. (2014). Impact of internal and external factors on the performance of fast-growing small and medium businesses. Management: Journal of Contemporary Management Issues , 19 (1), 119-159.
Savrul, M., Incekara, A., & Sener, S. (2014). The potential of e-commerce for SMEs in a globalizing business environment. Procedia-Social and Behavioral Sciences , 150 , 35-45.
