Business organisations operate in an ever-changing world.  If an organisation is to survive it must be able to respond to these changes.  Pressure for change can come from internal factors or external factors. 

Internal Factors

These are factors which are within the direct control of the organisation. 

FINANCE

Availability of Finance 

• A lack of finance may mean an organisation cannot afford new premises in order to expand its operations.   
• It may be unable to update its equipment or train its workers so will not produce as efficiently.   
• It may be unable to develop new products and therefore may fall behinds its competitors. 
• If enough finance is available, the organisation can upgrade equipment, train workers and develop products becoming more efficient in production and more competitive in the market. 

Good Cash Flow 

An organisation may have poor cash flow – not enough cash coming in to cover the day-to-day running costs of the business. 

• This may mean that it cannot pay its debts and may have to make cost cutting measures eg staff redundancies or closing branches.  
• The worst-case scenario is that the organisation may go bankrupt. 
• Good cash flow allows the organisation to continue to operate and have good relationships with its suppliers. 

HUMAN RESOURCES

Ability of Employees 

The development of new products or the use of new technologies will require a skilled and motivated workforce.   

• A shortage of staff will result in lower output, inability to meet demand and inferior customer service. 
• Having enough experienced staff means that the organisation should be able to keep the business running and offer good service to customers.   

Skills of Employees 

• If staff do not have the skills to do the job, mistakes may be made leading to faulty products, higher waste, and poorer customer service. 
• A skilled workforce will have a higher rate of output and will make fewer mistakes, resulting in more products for sale that are higher quality. 

Motivation of Employees 

• A well-motivated workforce will remain with the organisation and have low absenteeism.  They will work hard to produce high quality products and will offer high levels of customer service. 
• Poorly motivated employees who are unhappy with management decisions may take industrial action eg go on strike.  They may have a poor work rate and high absenteeism. 

Decision Making Abilities of Managers 

• Skilled managers should make good decisions leading the organisation to success eg a decision to launch a new product or to change production methods. 
• Unskilled or inexperienced managers may make poor decisions and/or may be less creative and innovative in their decision making.  This can affect all areas of the organisation – marketing, human resource management, operations or financial control. 

CURRENT TECHNOLOGY

Capacity to Use Current Technology  

• Effective use of current technology in production should mean that goods and services can be produced more cost-effectively and to a higher quality standard.  
• ICT enables efficient information processing so can be an aid to successful decision-making. 
• Ineffective use of current technology may slow down production rates and hinder effective communication between employees and with customers. 

 

See later units for further detail on the impact of current technology on specific business functions.