Internal And External Factors

An organisation’s success is influenced by factors operating in its internal and external environment. An organisation can increase its success by adopting strategies that manipulate these factors to its advantages. A successful organisation will not only understand existing factors but also forecast change so that it can take advantage of change within the environment in which it operates.
A STEP analysis is used to identify the external forces affecting an organisation. STEP factors are external forces which the organisation does not have direct control over these factors. These factors are as follows: Social factors, technological factors, economical factors and political factors.
Social forces affect our attitudes, interests and opinions. These forces shape who we are as people, the way we behave and ultimately what we purchase. Population changes also have a direct impact on organisations. Changes in the structure of a population will affect the supply and demand of goods and services within an economy. Falling birth rates will result in decreased demand and greater competition as the number of consumers fall. Conversely, an increase in the global population and world food shortage predictions are currently leading to calls for greater investment in food production. In summary, organisations must be able to offer products and services that aim to complement and benefit people’s lifestyle and behaviour; else they will lose market share and demand for their product or service.
Organisations use technology in many ways. They have technology infrastructure such as the internet and the telephone. They also use technology systems incorporating a multitude of software which help them manage their business. They use technology hardware such as mobile phones, laptops and faxes to help them in their business.
All businesses are affected by national and global factors. National and international interest rate and fiscal policy will be set around economic conditions. The climate of the economy dictates how consumers, suppliers and other organisational stakeholders such as suppliers and creditors behave within society. With the current economy undergoing recession, it has high unemployment, low spending power and low stakeholder confidence. On the other hand, an economy which is booming such as China will have high spending power and high stakeholder confidence. A successful organisation will respond to the economic conditions and stakeholder behaviour. Furthermore, organisations will need to review the economic conditions are having on their competitors and respond accordingly. Organisations are affected by economies throughout the world and not just the countries in which they are based or operate from. For example, the global credit crunch originating in the USA has contributed to the credit crunch in the UK in 2007/2008. Cheaper labour in developing countries affects the competiveness of products from developed countries. A truly global player has to be aware of economic conditions across all borders and needs to ensure that it employs strategies that protect and promote its business through economic conditions throughout the world.
Political factors affect organisations in many ways. Political factors can create advantages and opportunities for organisations. However, they can also place obligations and duties on organisations. Political factors can include the following types of instrument; legislation such as minimum wage or discrimination laws, voluntary codes and practices, market regulations, trade agreements, tariffs or restrictions, tax levies and types of government regime. Non-conformance with legislative obligations will lead to sanctions such as fines, adverse publicity and imprisonment.
A STEP analysis will help Tom gain information on “Tiny Tees”. It will provide him with a strong framework about the organisation by helping him identify key factors that affect the business. The STEP analysis will help Tom to

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