Understanding Business Internal Factors How internal factors impact

Understanding Business Internal Factors How internal factors impact on business activity

What are “internal factors”? • Internal factors are influences from within the business which affect how well it achieves its objectives • Internal factors can influence the business for the better or for the worse - this means they can have a positive or negative affect on success • Internal influences are more easily controlled than external influences • Managers take decisions which affect the overall impact of internal factors

Internal Factors which can impact business activity : - • Human resources (employees) • Finance • Current technology

Influence of Human Resources Through the quality of work staff produce As a result of their levels of skill, experience and training Through a decision by staff to take industrial action Through the quality of the service given to customers

Influence of HR / Employees TASK – Think about how each of the HR Scenarios will have an impact on the business HR Scenario Staff taking time off sick due to stress Unhappy staff look for work somewhere else Staff go on strike and production stops Customers complain about staff being rude and unhelpful A worker has been injured using machinery they haven’t been trained to use Impact on Business

Influence of HR / Employees HOW TO DEVELOP A POSITIVE IMPACT • Provide a programme of training (induction, on and off the job) to develop employee skills • Allow staff to participate in decision-making to make them feel involved e. g. quality circles • Provide financial rewards for staff who meet targets e. g. bonuses • Provide a high quality working environment e. g. canteen, staff room, gym • Provide counselling service to help employees with problems e. g. emotional, financial, alcohol and drug dependency • Encourage activities to develop team bonding e. g. social nights • Offer flexible working practices e. g. job-sharing, home-working and flexi-time

Influence of Finance Cash flow position – this determines how much money is available NOW to achieve objectives Ability to raise new sources of finance – this also affects business plans e. g. growth or to fund a new advertising campaign High profits can help fund Lack of funds, however, can salary increases to attract make it difficult to pay back creditors e. g. suppliers, bank better trained staff or buy and HMRC - the business new equipment to make could go into liquidation company more competitive Often businesses need to reduce costs in order to survive when cash flow is poor e. g. shut down factories/shops, make staff redundant or re-locate overseas

Influence of Finance HOW TO DEVELOP A POSITIVE IMPACT • Negotiate hard for the best credit terms from suppliers whilst ensuring your own customers pay up quickly at the same time • Try and spread repayments of large purchases over a period of months/years • Prepare cash budgets to identify cash flow problems in advance • Give managers budgets to control their spending • Shop around for deals • Compare financial performance against a top performing rival company of a similar size

Influence of Technology Business who can afford to automate production (e. g. use robots) can reduce their costs and become more competitive Communication technology such as video conferencing can help staff work effectively on projects from different countries (ie collaborate) Having an e-commerce facility on the business web-site and using social media sites can help sell products to more customers world-wide However there must be back-up plan for when technology goes wrong e. g. faults, viruses and break-downs

Influence of Technology TASK – Think about how each of the Technology Scenarios will have an impact on the business Technology Scenario Staff are worried they will be made redundant if new technology is introduced Customers have heard that their personal data is not safe in the company database Business is using old and out of date machinery in the factory The business does not have video -conferencing technology but has branches in different countries Impact on Business

Influence of Technology HOW TO DEVELOP A POSITIVE IMPACT • Businesses should keep up to date with technological advances in their area • Research into what top performing companies in their sector are doing may give an insight into areas where technology improvements can be made • Consult staff on all changes when bringing in new technology • Carefully manage implementation of new technology to ensure it is carried out smoothly e. g. training, bringing in extra staff to help • Seek out opportunities for grants when buying new technology e. g. from local and national government or the EU

Read through the information from the BBC Bitesize page Try the test at the end https: //www. bbc. co. uk/bitesize/guides/zxq 43 k 7 /revision/1

QUESTIONS 1. What are the INTERNAL factors that affect the business? 2. Who can make decisions that have an impact on the internal factors? 3. Outline 3 things managers can do to improve the human resources / employees 4. Describe the effect of the business running out of cash 5. What will the effect on the business be if they can’t afford to develop an e-commerce site to sell online? 6. Explain the impact of well trained employees on the organisation 7. Explain the impact of poor cash flow management on the business 8. Explain the impact of investing in new video conferencing technology on the business