Internal Environment

Internal Environment:

There are number of factors which influence the various strategies and decisions within the organization. These factors are known as internal factors:

(a) Human Resources: It involves the planning, acquisition, and development of human resources necessary for organizational success. It points out that people are valuable resources requiring careful attention and nurturing. Progressive and successful organizations treat all employees as valuable human resources. The organization’s strengths and weaknesses is also determined by the skill, quality, morale, commitment and attitudes of the employees. Organizations face difficulties while carrying out modernizations or restructuring process by the resistance of employees. So, the issues related to morale and attitudes should seriously be considered by the management. Moreover, global competitive pressures have made the skilful management of human resources more important than ever.

(b) Company Image: One company issues shares and debentures to the public to raise money and its instruments are over subscribed while the other company seeks the help of different intermediaries like underwriters to generate finance from the public. This difference underlies the distinction between the images of the two companies. The image of the company also matters in certain other decisions as well like forming joint ventures, entering contracts with the other company or launching of new products etc.

(c) Management Structure: Business has reshaped itself into the formation of company where it is run and controlled by the entrepreneurs who appoints Directors to run the company. Therefore, the composition of board of directors and nominees of different financial institutions could be very decisive in several critical decisions. The extent of

professionalization is also a crucial factor while taking business decisions.

(d) Physical Assets: Economies of scale, smooth supply of produced materials, and efficient production capacity are some of the important factors of business which depends upon the physical assets of an organization. These factors should always be kept in mind by the managers because these play a vital role in determining the competitive status of a firm or an organization.

(e) R & D and Technological Capabilities: Technology is the application of organized knowledge to help solve problems in our society. The organizations which are using appropriate technologies enjoy a better competitive advantage than that of their competitors. The organizations which do not possess strong Research and Development departments always lag behind in innovations which seem to be a prerequisite for success in business. Therefore, R & D and technological capabilities of an organization determine a firm’s ability to innovate and compete.

(f) Marketing Resources: The organizations which possess a strong base of marketing resources like talented marketing men, strong brand image, smart sales persons, identifiable products, wider and smooth distribution network and high quality of different services, make an effortless inroads in the target market. The companies which are having so strong basis can also enjoy the fruits of brand extension, form extension and new product introduction etc. in the market.

(g) Financial Factors: The performance of the organization is also affected by the certain financial factors like capital structure, financial position etc. Certain strategies and decisions are determined on the basis of such factors. The ultimate survival of organizations in both the public and private sectors is dictated largely by how proficiently available funds are managed. So, these were some of factors related to the internal environment of an organization. These factors are generally regarded as controllable factors because the organization commands control over these factors and can  modify or alter as per the requirement of the organization.