Internal And External Factors That Influence A Company 's Operating Situation Essay

External environmental factors are the macro environment affecting a business; they are factors outside the company and which they have no control over (Kotler & Armstrong, n.d.) these external factors bring about impacts to the company thus a company should always be prepared to react.

Deflation is a decline in the volume of available money or credit that results in lower prices, and, therefore, increases the buying power of money.

Some of you might not know what deflation means. Deflation means that prices go down on goods, but deflation is not good. When products of prices go down usually the business suffers and they have to fire people or give them lower wages.

Deflation is a reduction of the general level of prices in an economy. This contributed to serious economic problems for many American farmers during the late 1800s since these people did not possess any control over the price of their grain which meant if other countries had a fruitful harvest of wheat, the price of their grain would drop, leaving them in financial ruin as such an economic situation often plunged them into tons of debt.

Inflation is an increase in the average overall price for goods or services while deflation is the decrease of average overall price for goods and services. Inflation always produces the effect of reducing the value of money and reduces the value of future monetary obligations. Reducing the value of money means a consumer has less money to buy services or goods. Reducing the value of future monetary obligations means investing or lending becomes more restricted as the value of return will be less than the amount paid back. Economist Arthur Okun analyzed the relationship between Unemployment and the GDP statistical. Okun’s law simply states that with rising unemployment there is a relationship of slow growth. Unemployment is a person looking for work and unable to find work. Deflation is the value of any amount of money rises. Deflation makes borrowers less likely to borrow because the value of the money they have to pay back will raise.

A recession is full-proof sign of declined activity within the economic environment. Many economists generally define the attributes of a recession are two consecutive quarters with declining GDP. Many factors contribute to an economy's fall into a recession, but the major cause argued is inflation. As individuals or even businesses try to cut costs and spending this causes GDP to decline, unemployment rate can rise due to less spending which can be one of the combined factors when an economy falls into a recession. Inflation is the general rise in prices of goods and services over a period of time. Inflation can happen for reasons such as higher energy and production costs and that includes governmental debt.

Deflation is the reduction of the amount of available money that was available to the government and the population. Its effect was lengthened to the hardship. Australia eventually recovered as export prices began to rise.

These factors influence the internal environment of an organisation and they help in identifying the past and the present of the company, It also provides a frame work for reviewing strategy position and direction of the company.

It is defined as all the forces or conditions that are available within an environment that affects an organization and business. It is also known as controllable factors because business can control them. The internal environment deals with the management of resources like human resources, physical resources, technology, monetary resources and others that constitute the organization in order to implement or execute a strategy. Internal environment also includes culture and other intangible aspects like teamwork, coordination, efficiency level of employees, employee’s salaries and monitoring costs. The strategy for competition should also be in sync with the internal resources especially the internal environment.

     A businesses environment creates many opportunities as well as problems for prospering businesses. The environment determines what a business can do by shaping and channeling its development. Businesses function within an environment by allowing entrepreneurs to raise capital and create profits freely. The supply of money available within a business as well as the economic stability through times of growth and recession have strong effects on businesses. Not only is the physical environment, including natural resources, pollution and energy as discussed previously, important, but many other

In this term of our discussion we’re talking about business environment. It’s like an overview of the whole business environment. Simply environment of a business means the external forces including the business decisions. They can be forces of economic, social, political and technological factors.

An analysis of the external environment includes the factors in a business’s external environment about a business's industry, competition, and political and social environments, and affects the firm’s strategy (Aaker, 2001).

Factors that happen in the external environment are known as external factors or influences. These will affect the main internal functions of the business and possibly the objectives of the business and its strategies. The main factor that affects most business is the degree of competition - how fiercely other businesses compete with the products that another business makes. The other factors that can affect the business are:

The business environment can be understood in terms of four factors: Factor (Input) Conditions, Context for Firm Strategy and Rivalry, Demand Conditions, and Related & Supporting Industries. Factor (Input) Condition:

As the name suggests, “internal” business environment refers to internal factors and resources that affect the running of the business. This primarily includes the workforce where the employees play a vital role in affecting company’s performance. If a company has well trained or motivated employees, that company is likely to get good output from them. However, if the same company recruits unmotivated employees who do not perform well or dig in their heels when a new plan arrived, this will affect that company’s production levels and ultimately hinder its profitability. Another factor to consider is all the capabilities that a company possesses. The tool used to monitor them is the resource based