The analysis of the internal perspective of the growth of the business reflects on the operations that the organization must undertake to stimulate productivity and the quality of employees. In addition to the internal factors that influence the organization, external factors affect the performance of the business. The external factors include political, economic, socio-cultural, technological, legal, and environmental issues (Oakland 114).
The political environment involves the political stability of the country in which the business is operating. In this case, the additional factors that the political factors would influence include the regulation policies formulated by the government. If the government formulates stern policies based on its doctorial nature, the business operations will suffer leading to poor performance and reduction in quality provision. On the other hand, if the government adopts democratic leadership, business issues will be considered during policy development leading to business growth in the whole industry (George et al., 145).
Economic factors are crucial for business survival and success. In this case, the businesses will be structured in a manner that will enhance the continuous maintenance of existing capital while reaping profit from it.
This implies that factors such as employment level, disposable income of consumers, inflation rates, productivity, and wealth of the consumers will vary accordingly. The level of employment influences the performance of the business because the employment rates raise the demand for its products and services. As a result, it stimulates the growth and development of the business due to increased revenue levels. On the contrary, when the employment rates are low, the performance of the business declines leading to reduced revenues due to the decrease in the number of consumers.
The disposable income to consumers affects the performance of the business. Even though there could be high employment rates, the level of disposable income could still below as expected. However, when the disposable income is high, the performance of the business would also be high since the circulating money would be sufficient to make consumers have the willingness and ability to purchase whatever they desire.
In this case, the business performance would improve leading to significant growth in its capital base. As a result, the business would expand drastically to cover new markets and increase its market share. Meanwhile, when the disposable incomes are low, consumers cannot access and purchase multiple products and services leading to the poor performance of the businesses (Oakland 245).
The inflation rates of the country affect the performance of the business. With high inflation rates, the amount of money in circulation is considerably high. This reduces customers’ purchasing value. This implies that the performance of the company would decline due to the decrease in the value of money. As a result, business expansion and growth would decline since the level of revenue would below. However, with low inflation rates, the economic environment is conducive for expansion since there will be high revenues. This implies that the inflation rate has a significant impact on the growth and performance of any business within any country.
Interest rates refer to the amount of money that businesses derive from their investments and the financial institutions’ charges on their lending. When the interest rates are high, the performance of the business would be affected based on whether the business operations depend on borrowing or lending. If the business conducts its operations based on borrowing, high-interest rates will affect its operations, as there will be limited capital for investment.
On the other hand, when the business borrows and the interest rates are low, more capital would be available for investment. Meanwhile, when the interest rates are low for the lenders, their businesses are affected leading to limited capital available for investors. This affects the level of business performance and the general growth of the business. Contrary to such a situation, when the interest rates are high, lenders offer capital in the market since their returns are high. As a result, business expansion and productivity will improve considerably.
Another critical external factor that influences the development of the business is the socio-cultural factors, which affect its performance. In this regard, the social responsibility of the business to the surrounding community determines the actual treatment of the organization to people. If the business enhances its social responsibility, it will earn more respect and loyalty from the surrounding environment leading to more sales. The outcomes associated with social responsibility usually affect the company’s growth and expansion. This implies that organizations need to address matters of social responsibility such as health centers, schools, and infrastructure with considerable keenness to ensure a favorable relationship with the community.
Various technological factors of the environment influence the growth of the business. Any organization that pays special attention to changes in technology and ensures that it changes accordingly has high chances of enhancing the quality of its products and employees’ productivity. In this case, delivery will improve through the specialization of employees, as this will facilitate the simplification of responsibilities and duties. Similarly, consumers would be able to appreciate the technical standards adopted by the business leading to growth in revenues. With the rise in the level of revenues, the business would be able to expand and develop further.
On the contrary, when the business disregards technological changes, its operations in the market will be disadvantaged as the business will not be able to meet the consumers’ needs effectively. This will lead to a decrease in the revenue generated and a gradual loss of customers as they seek effective service delivery in other businesses.
Another crucial aspect of the external environment is environmental factors. In this case, the business should operate to conserve and preserve the environment. This implies that the business should be able to conduct its operations without any pollution or with reduced levels of waste disposal. As a result, there would be no environmental degradation leading to compliance with environmental regulations. On the other hand, instances of environmental pollution by the business will lead to limited operations and high closure rates (Longenecker 189).
For proper operation of the business within any country, there are legal regulations that it must observe to enhance its performance. In this case, depending on the nature of the business, whether a sole proprietorship, partnership, or corporation, the business must meet the rules governing its establishment and operations. In this case, the business would be free to participate in any form of legitimizing activities.
Through this practice, the performance of business would be high, and it can expand and grow in the industry. All these forms of external factors have a significant impact on the performance of the company. With the proper approach of the business in consideration of these factors so that they all work in harmony, the business will attain significant growth.
Works Cited
George, Stephen, and Arnold Weimerskirch. Total quality management: strategies and techniques proven at today’s most successful companies. New York: Wiley, 2004. Print.
Longenecker, Justin Goodell. Small business management: launching and growing entrepreneurial ventures.. 14th ed. Mason, OH: Thomson/South-Western, 2008. Print.
Oakland, John S. Total quality management: text with cases. 3rd ed. Oxford: Butterworth-Heinemann, 2003. Print.