The second factor in the internal environment is the firms’ competitors. In any business venture, a firm must be ready for its competitors. Competitors are basically the other companies which are vying for a piece of the same pie that the business is aiming for. A firm planning to enter any market must always check out the competition, and know specifically just on what level they are planning to compete and how. Though it’s fierce at times it is the catalyst for advances and improvements in products and services. More companies means more choices, more choices means companies compete by first developing better products, and than later, lowering the price on those products. Here our model company is still succeeding. Being the first American Hamburger on Philippine shores McDonald’s has managed to compete with Jollibee and the others. Both in price and in quality McDo has managed to stay right in there with the competition. This is proof that through breakthroughs they have found a way to keep the taste yet minimize the cost.
The next factor in the internal environment is the supplier. The suppliers are simply other firms who provide the business with production tools such as raw materials, machinery, and other related equipment which the firm must procure prior to production. Generally a firm would want to keep a good relationship with their suppliers to ensure that the materials needed for production are good quality and readily available. The suppliers more than anything else affect the price at which the firm sells its goods. The rise and fall of the prices of the end products are usually directly related to the price at which the firm paid for the raw materials used in production. Having good suppliers is key to having a progressive business. Through a total of 49 years McDonald’s solution to the supplier-firm relationship was to be its own supplier. This system has solved the problem for parts of the world where the ingredients are not available. Not only has it found a way to keep supplies constant, but its also found a way to keep raw-materials at a certain standard all over the world, and even prices at a certain uniform level.
Another factor in the internal environment is the employee. These are the people who are into the day to day planning, running, and maintenance of the firm and everything in it. Companies must select and staff their departments well, taking into consideration qualification, attitude, and work ethic. Selection of employees is crucial to a firm’s success. It is expected that the employees do their jobs as best they can, in the hope of reaching the firms goals. In return it is expected that the firms look out for their employee’s welfare. Firms hoping to succeed must find ways to keep their employees motivated, focused and trained in the latest technological advancements related to their jobs. In the case of McDonald’s they have an intensive training program and a good benefits program for all their employees. On top of that McDonald’s has a work system which is very efficient and sure to guarantee quick service at any time of the day. So well was the training and service program that other similar business’ followed suit. Given that a firm achieves all these things, it can expect to have a work force which can be compared to a well-oiled machine dedicated to doing its job well and in the end the firm’s success.
The last two factors of the internal environment are very much related. These are the factors from which a firm gets its starting capital, and how the firm generates cash when it is needed. The two last factors are the shareholders and the financial institutions or banks. First of the two cash cows are the share holders, the share holders are in effect owners of the company and in being so; they can influence company policies and procedures. They are the people who put their trust in the firm and its mission, but they expect in return good dividends for it. When share holders are unsatisfied they can withdraw their interests and invest elsewhere. The second cash-cow is the financial institution. These are the institutions such as banks and lending investors who lend money to a firm to be repaid with interest when the loan is due. It is in the best interest of the company to create trust and confidence with these institutions by making sure all loans are paid on time. Firms need these banks for future support in times of expansion or crisis.
Hand in hand with the internal environment of the company is the external environment in which a company is going to subsist in. The factors of the external environment though they do not affect the company as directly as the internal environment; affect the company in a lower impact yet just as important way. The factors of the external environment affect the company long-term. It affects the way the company formulizes its strategies and policies for the long run. The external environment is especially important to organizations doing business across geographical borders.
The first factor in the external environment is the physical environment in which a firm will have to exist; geographical features such as size, location, and even sometimes the climate are taken into consideration as part of the physical environment. Another consideration taken into account in the physical environment are; details such as availability of raw materials and human resources, these are considered and classified weighing whether they will be assets or liabilities to the firm and if a profit can be made. The last consideration in the physical environment is the availability of infrastructure; it must take into consideration the amenities it needs to be competitive, such amenities include availability of airports, roads, ports, and even the communication capability found in a given area. These factors must be considered, and if some are to be sacrificed or spent for, it must be deemed in the best interests of the company, and must be profitable sacrifices or investments.
The next factors of the external environment are the politico-legal environment and the economic environments present in the area. I discuss these two together because they are very closely tied to each other and exist almost in unison. The politico-legal factors include such direct impact things to consider such as the attitude of the country’s government towards foreign firms and new ideas. Some countries would be reluctant to introducing some things into their culture so a company must respect that and adjust. Another important aspect to consider is the political stability of the present government in power; a company may have to deal and reach agreements with heads of state to be able to enter into certain countries; all that work would be in vain, if the present government is not stable and its power is uncertain. The last entry for this factor is the state’s complex legal framework, a firm will have to know and exist within the given area’s laws, such aspects as foreign ownership of land, labor laws and even the little technicalities must be looked into for the firms success in that country. All these things taken into consideration the next to factor to take into consideration is the country’s economic environment. This factor is usually very much dependent on the factors discussed earlier; usually a stable government and a good justice system will ensure economic stability. These factors are extremely important to company’s looking to make big time, long-term investments in a certain country or area where long-term is the most important thing. It would be a great loss to an MNC to make this investment only to have it torn apart by war, terrorism or political and economic unrest later on.
The following factor external in nature; is the technological environment. In the last half of the century a rapid growth in the use of technology was realized, travel has become faster, communications easier to use and more accurate; in effect the world has become a very small place compared to what it used to be in the times of sailing merchant vessels. Along with this technology came a spectacular increase in products and services available to consumers; in effect firms should use this to their advantage, in developing new products or further improving existing ones. It is through advancement the world is becoming a better place to live in with almost no limitations.
The last and probably the most delicate factor a company has to deal with in its external environment is the socio-cultural environment around the world. Attitudes beliefs or even customs differ from on place to the next, these ideas even change with the passing of time. A firm must be conscious of these beliefs and respect them; it must also in effect monitor them and adjust with the changes that time or experience may bring to the people.
In defining the different aspects found in the business environment it is clear that a firm must take everything that has an effect on it into consideration to ensure its success. And given that time changes everything in that environment, a company must be sure to be constantly monitoring the changes, making adjustments of its own to make sure it keeps up with the changes in its business environment. Failure of the firm to do so will mean being less competitive and less productive, not giving it the maximum profit, hampering the firm’s progress as a whole and in extreme cases bankruptcy.
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