Understanding the Environmental Factors of a Business: Internal and External Classification

Indeed, each business project is carried out within an organization. It has its own culture, style and structure. These elements are decisive for the success or failure of the project.

It is important to mention that every project carried out, whether small or even macro, will be affected by the environmental factors of the company. For this reason, they will affect the expected results.

Indeed, environmental factors are all the circumstances that affect the project during its execution. This is why we can also say that environmental factors are all conditions that the project team cannot control. Undoubtedly, all these factors must be analyzed in the project management process, since they affect differently depending on the type of organization.

Classification of business environmental factors

The main environmental factors of a company that can affect the execution of its projects can be classified into internal and external.

Internal factors

Undoubtedly, internal factors are the environmental factors of each of the organizations that can positively or negatively affect the execution of a project. To determine what are the internal factors that can affect the performance of a project, we must ask ourselves the following questions:

1. What is the organizational culture of the company?

Of course, knowledge of the organizational culture is very important as it defines the mission, vision and values ​​of the company, as this will provide the basis for defining the norms of the corporate culture and the type of beliefs that are processed. Likewise, culture defines the style of leadership that is used and the authority practices that are applied.

2. What resources does the company have?

Then, in this section, the company considers the resources available to it. One of the most important is human resources, analyzing the skills and knowledge of staff. This determines the skills, know-how and professional skills that the employees possess. In addition, the IT infrastructure used by the company in its processes is analyzed.

3. What is the location of the business?

If the company is located in a single point or if it is distributed over several different geographical points, this will influence the availability of resources, staff control and schedules.

4. What is the company’s infrastructure?

Finally, the infrastructure of the company is the factor related to the equipment, facilities, machines and the hardware and software system available. All of this will provide the necessary support to complete the project.

External factors

Now, external factors are all factors which are external to the organization and which also affect the favorable or unfavorable results of a project. The most important questions to consider are:

1. What social or cultural aspects can affect us?

Naturally, an important external aspect is the social and cultural aspect, because changes in values, lifestyles and education can occur. These changes may alter attitudes towards the acceptance of certain products.

2. What standards must be met?

Standards set by industry or the government itself may affect performance. Standards must be met, since that is how a group of companies in a certain industry agrees to work or because the government requires it.

3. What are the legal restrictions?

Likewise, another aspect that could affect the performance of the project could be the regulations in force within the industry in which it competes. Legal restrictions are one of the most important factors to consider, as every project has a legal context.

The legal framework that may affect the project may be national or international. All this will depend on where the organization is located and distributed.

4. What is the risk tolerance?

On the other hand, risk tolerance is determined by the level of risk that stakeholders are willing to take. This in order to carry out the project.

5. How does the market work?

Generally, in this section, you should review the level of competition, the number of suppliers and customers. The organization competes in a market that may have many competitors or, conversely, few participants.

Similarly, there may be many or few suppliers, which will positively or negatively affect the supply of raw materials and inputs needed to carry out a project. The customer is another relevant or perhaps the most important factor for success in the competitive market environment. The organization must not forget that it must focus on better satisfying the customer’s need.

6. What is the general environment?

In the general environment, aspects such as the economic conditions of the country or the world, depending on the competitive environment, must be taken into account. Elements such as purchasing power, inflation rates, exchange rate and economic growth in general are taken into account.

In addition, the demographic, geographical and environmental conditions that may have an impact on the performance and the proper execution of the project must be taken into account.

To conclude, it can be said that the environmental factors of the company must be considered as a determining element in the realization of the success or failure of a project.

For this reason, it is important to identify them correctly when planning a project. Therefore, good project management assumes adequate identification of these environmental factors to avoid problems, delays or failures in the execution of projects.