Internal & External Environmental Factors That Affect Business

 The internal environment of an organization refers to events, factors,

people, systems, structures, and conditions inside the organization that are
generally under the control of the company. The company's mission
statement, organizational culture, and style of leadership are factors typically
associated with the internal environment of an organization. As such, it is
the internal environment that will influence organizational activities,
decisions, and employee behavior and attitudes. Changes in the leadership
style, the organization's mission, or culture can have a considerable impact
on the organization.
 The external environment are those factors that occur outside of the
company that cause change inside organizations and are, for the most part,
beyond the control of the company. Customers, competition, the economy,
technology, political and social conditions, and resources are common
external factors that influence the organization. Even though the external
environment occurs outside of an organization, it can have a significant
influence on its current operations, growth, and long-term sustainability.
Ignoring external forces can be a detrimental mistake for managers to make.
 Environmental scanning refers to the monitoring of the organization's
internal and external environments for early signs that a change may be
needed, to accommodate potential opportunities or threats, and to make
adjustments to allow the company's strengths to combat its weaknesses.
SWOT analysis is a type of environmental scanning ,which looks
specifically into the strengths, weaknesses, opportunities, and threats of the
internal and external environments. A manager will begin analyzing the
internal environment by looking into inefficiencies inside the organization,
and will then look outside to the external environment and things occurring
independent of the organization. Environmental scans allow managers to use
the knowledge gained during the scanning process to decide what strategic
steps, or changes, the organization needs to take to create or maintain a
competitive advantage.
 Understanding of Business Environment

Every factor inside or outside a business organization has a profound influence on

business activities (Internal and external environment create a business
environment).

 The Importance of Business Environment Understanding

 Business environment inserts its impacts on business success, scale, vision,
and development strategy.
 Once they know about both positive and negative effects within and outside
the company, they can produce suitable strategies to handle any predicted
and unpredicted situation.

 Internal Environment Factors

 Definition

The internal factors refer to anything within the company and under the control of
the company no matter whether they are tangible or intangible.

These factors after being figured out are grouped into the strengths and weaknesses
of the company. If one element brings positive effects to the company, it is
considered as strength.On the other hand, if a factor prevents the development of
the company, it is a weakness. Within the company, there are numerous criteria
need to be taken into consideration.

 Types

There are 14 types of internal environment factors:

1. Plans & Policies

2. Value Proposition
3. Human Resource
4. Financial and Marketing Resources
5. Corporate Image and brand equity
6. Plant/Machinery/Equipments (or you can say Physical assets)
7. Labour Management
8. Inter-personal Relationship with employees
9. Internal Technology Resources & Dependencies
10. Organizational structure or in some cases Code of Conduct
11. Quality and size of Infrastructure
 12. Task Executions or Operations
13. Financial Forecast
14. The founders relationship and their decision making power.

 External Environmental Factors

Definition

On the contrary to internal factors, external elements are affecting factors outside
and under no control of the company. Considering the outside environment allows
businessmen to take suitable adjustments to their marketing plan to make it more
adaptable to the external environment.

There are numerous criteria considered as external elements. Among them, some
of the most outstanding and important factors need to listed the are current
economic situation, laws, surrounding infrastructure, and customer demands.

Types

Micro factors:

1. Customers
2. Input or Suppliers
3. Competitors
4. Public
5. Marketing & Media
6. Talent

Macro factors:

1. Economic
2. Political/legal
3. Technology
4. Social an
5. Natural
 There are numerous criteria considered as external elements. Among them some
most outstanding and important factors need to listed are
 Economic situation
 Laws
 surrounding infrastructure
 customer demands.
 Technological factors
 Competition

There are 7 factors that have direct impacts on business firm.

 Tax rate
 Exchange rate
 Inflation
 Labor
 Demand/supply
 Wages
 Recession

QUALITY AND QUALITY MANAGEMENT

 Introduction

Quality and quality management are defined as an integration of all functions of a

business to achieve high quality of products through continuous improvement
efforts of all employees. It is the concept of meeting or exceeding customer
expectation applied to the product and service. In brief, quality and quality
management in particular can be defined as directing (managing) the whole (total)
production process to produce an excellent (quality) product or service .

Achieving high quality is an ever changing, or continuous, process therefore

quality management emphasizes the ideas of working constantly toward improved
quality.

It involves every aspect of the company: processes, environment and people. The
whole workforce from the Chief Executive to the line worker must be involved in a
shared commitment to improving quality.

Quality was controlled by using a detection method (post production inspection),

problems were solved by management and management's role was defined as
planning, assigning work, controlling the production. Quality management, in
 contrast, is focused on the customer and meeting the customer's needs. Quality is
controlled by prevention, i.e., quality is built in at every stage. Teams solve
problems and everyone is responsible for the quality of the product. Management's
role is to delegate, coach, facilitate and mentor.

 Principles of Quality Management

Quality Management is a distinct discipline of management and lay down

universally understood and accepted rules for this discipline.

The ISO technical committee working on the ISO9000 standards had published a
document detailing the quality management principles and application guidelines.
The latest revision (version 2008) of ISO 9000 standards are based on these
principles.

 Definition of Quality Management Principle

"A quality management principle is a comprehensive and fundamental rule / belief,

for leading and operating an organisation, aimed at continually improving
performance over the long term by focusing on customers while addressing the
needs of all other stake holders".

 The eight principles are:

1. Customer-Focused Organisation
2. Leadership
3. Involvement of People
4. Process Approach
5. System Approach to Management
6. Continual Improvement
7. Factual Approach to Decision Making and
8. Mutually Beneficial Supplier Relationships..

 The Role of Society in Sustaining Quality Practices

Quality should always be everybody’s responsibility within the society. Each

institution therefore should be an agent that advocate for better quality goods and
services in order to create better living standards. Some of the specific institutions
include:

1. Government
2. Citizens/Consumers

3. Civil Society

4.Employees

5. Management

6. Stakeholders (Anybody who has interest)

7. Media

 Impact of Quality Services on Institutions/Society

Good/poor products/service will have a direct impact on entities through several

ways including:

a) The Organization/Business

- Increased customer satisfaction

- Enhances profitability
- Lower costs
- Enhanced competitiveness
- Improved responsiveness to organizations environment and customer
requirements
- Reduces legal liabilities
- Improved reputation of the organization
- Less wastage

b) Employees

- Increased morale
- Increased productivity
- Enhances their interest on the job
- It provides them with an avenue of being good corporate citizens
- Provides and promote a positive culture and responsibility

c) The Society
- It allows procreation of better quality goods and services
- Better utilization of resources
- Improved quality of life
- Protecting the society against harmful practices
- Enhances value creation
- Creation of employment

d) The Consumer

- They will receive better quality goods and services

- Better living standards
- Higher value for money
- Protection against exploitation and harm
- Protection against harmful environmental hazards

Chapter2 :QUALITY AND THE ENVIRONMENT

Environmental Policies on Quality Management

The intent of an environmental policy is to state the organization’s commitment to

continuous improvement in environmental performance. A strong, clear
environmental policy can serve as both a starting point for developing the
Environment Management System and a reference point for maintaining
continuous improvement.

The policy should be evaluated regularly and modified, as necessary, to reflect

changing environmental priorities. The policy should function in two ways:

(1) Within the company, the policy should focus attention on environmental issues
associated with company activities, products, and services;

(2) Outside the company, the policy is a public commitment to addressing

environmental issues and continuously improving environmental performance.

The environmental policy must address:

- Commitment to compliance with relevant environmental legislation and

regulations
- Pollution prevention
- Continuous improvement

Tips for Developing an Environmental Policy :

1. Develop a policy that reflects perspectives of various employees within the

company

2. Display the policy statement in view of all employees; the policy should be
available to the public and customers if requested

3. Include top management signatures on the policy to demonstrate understanding

and commitment.

Example

Environmental Policy
The Export Processing Zones Authority (EPZA) is an investment promotion
agency responsible for catalyzing export oriented investments in economic zones
and recognizes responsibility for protection of the environment.

To meet this commitment, the EPZA:-

- Controls its services and operational activities in order to minimize negative

environment impacts
- Comply with relevant applicable environmental laws and other requirements that
apply to the activities of the organisation
- Set up and strive to achieve its environmental objectives and targets. These
targets shall be monitored and periodically reported for review
- To train and motivate members of staff to carry out tasks in an environmentally
responsible manner
- Continuously improve environmental performance by minimizing pollution,
adopt waste management best practice, and minimize water and energy use
- Achieve these by establishing, implementing and maintaining effective processes
for environmental management as required by ISO 14001:2004 Environmental
Management System

Environmental Management Systems

Environmental Management: Environmental Management is not, as the phrase

could suggest, the Management of the environment as such but rather the
management of man's interaction with and impact upon the environment. The need
for environmental management can be viewed from a variety of perspectives.
Environmental management is therefore not the conservation of the environment
solely for the environment’s sake but rather the conservation of the environment
for human kind’s sake. An 'environmental management standard or system or
protocol attempts to reduce environmental impact as measured by some objective
criteria. The ISO 14001 standard is the most widely used standard for
environmental risk management.

Business and Environment

All kinds of businesses are directly or indirectly related with the environment. If
one can properly apply the environmental management system in business, the
business could be benefited by several ways. Such as:

- Cost savings.
- Minimized commercial risks and liabilities
- Improved competitive advantage
- Improved employee satisfaction

Basic Concepts of Environmental Management

Man-made changes in the environment have continued through most historical

epochs. However, the last two centuries following the industrial revolution have
witnessed accelerated environmental changes due to the exploitation of natural
resources on an unprecedented scale. Extensive burning of fossil fuels, release of
various chemical pollutants into the air, the water and soil, clearing of forests for
agriculture and extensive exploitation of all natural resources are now threatening
to destroy the very environment on which human existence depends.

Fortunately, awareness of environmental problems is growing in most countries of

the world. It is felt by many people that to continue development patterns that
cannot be sustained in the long term is a recipe for disaster. Governments are now
listening more to the advice of environmentalists and increasingly enacting
legislation aiming at protecting the environment from the negative impacts of
economic activities. However, the enforcement of environmental legislation is
proving to be difficult in most cases.

A new approach to environmental protection is now available thanks to the

development of new international standards on environmental management, in
particular, ISO 14001. This approach relies less on command-and-control dictates
from the Government and more on proactive efforts by all workers in the company.

The implementation of the environmental management system prescribed by ISO

14001 can lead to good compliance with environmental legislation and tangible,
continual improvement in the environmental performance of enterprises thanks to
the commitment and evolvement of top management and all workers. Widespread
implementation of these standards can go a long way toward improving the
environmental performance of industry and promoting sustainable development in
the countries of the world.

ISO 14000 Family of Standards

ISO 14000 is a group of standards covering the following areas:

- Environmental Management Systems (14001,14002, 14004)

- Environmental Auditing (14010, 14011, 14012)
- Evaluation of Environmental Performance (14031)
- Environmental Labeling (14020, 14021, 14022, 14023, 14024, 14025)
- Life-Cycle Assessment (14040, 14041, 14042, 14043)

The underlying purpose of ISO 14001 is that companies will improve their
environmental performance by implementing ISO 14001, but there are no
standards for performance or the level of improvement. It is a process for
managing company activities that impact the environment.

Some unique and important characteristics of ISO 14001 are:

- It is comprehensive: all members of the Organization participate in environmental

protection, the environmental management system considers all stakeholders, and
there are processes to identify all environmental impacts
- It is anticipative: it focuses on forward thinking and action instead of reacting to
command and control policies
- It is a systems approach: it stresses improving environmental protection by using
a single environmental management system across all functions of the
Organization.

The Environmental Management System contains the following elements:

- Identification of environmental aspects and significant impacts.

- Identification of legal and other requirements.
- Environmental goals, objectives, and targets that support the policy
- An environmental management program
- Definition of roles, responsibilities, and authorities
- Training and awareness procedures
- Process for communication of the EMS to all interested parties
- Document and operational control procedures
- Procedures for emergency response
- Procedures for monitoring and measuring operations that can have a significant
impact on the environment
- Procedures to correct nonconformance
- Record management procedures
- A program for auditing and corrective action
- Procedures for management review
Benefits of Implementing ISO 14000 EMS

Environmental Management System (EMS) is the foundation of the ISO 14000

group of international environmental management standards. An EMS can be
registered as meeting the ISO 14001 EMS standard.

Since the ISO 14001 EMS includes everyone in the Organization and all aspects of
the Organization that affect the environment, it can improve an organization's
environmental performance in many ways. This improved performance comes at a
cost to the Organization, a cost that can be recovered by aggressively seeking
benefits.

The benefits of an EMS and registration of the EMS to ISO 14000 are organized
into the following categories:

- Increased Profits
- Operations
- Marketing
- Regulatory Compliance
- Social

Conclusion

Protecting the environment by coming into compliance or, ideally, going beyond
compliance reduces waste and reduces costs and inefficiencies. It preserves natural
resources and reduces the cost of finding new and more resources. It makes greater
use of materials already purchased and reduces purchasing costs. It makes for
cleaner emissions and reduces the severity of spills, leaks, and other accidents.
Reducing these events reduces permitting costs, remediation costs, worker comp
costs, insurance costs, lawsuit costs and fines, and many other costs and fees.
Protecting the environment involves purchasing smaller amounts of materials or
purchasing less toxic materials. These choices improve worker safety and morale,
leading to more productive workers. Purchasing less hazardous materials reduces
the need for and the costs associated with the need for special equipment, special
training, and specially designed storage areas. These purchasing practices also
reduce the cost of disposal. Protecting the environment by going beyond
compliance helps keep regulators and inspectors out of the plant.

Chapter 3 :WORKPLACE CULTURE

Culture and Quality Paradigm

Quality culture is basically incorporation of quality in the overall system of an

organization which leads to a positive internal environment and creation of
delighted customers. A changed mindset at all the levels of management is the
basic tool for implementation of such a culture.

Enemies of Quality Culture:

- It’s the best we can do

- There is not enough time
- There is not enough money
- There are not enough people
- It is not in my budget
- It is not my responsibility
- Let someone else worry about it
- It is too late to change it
- The customer does not understand-It is not really a problem
- It is not my fault
- The quality control only applies to manufacturing
- It is as good as it can be
- Relax, we hit the goal

Friends of Quality Culture:

- The customer is first

- Continual improvement is essential to the success
- Quality does not take time, it saves time
- What gets measured gets managed
- Problems are opportunities in disguise
- The only bad mistake is a hidden mistake
- Training saves money
- It is the process, not the people
- Better is better than best

Creative quality culture involves:

- Pursuit of solving unidentified problems
- Surprising and delighting customers
- Goal of customer loyalty instead of satisfaction only
- Changes with stability and control
- Process focus

In order to inculcate quality culture at the workplace:

2. Effective Communication.

3. Changing Mindset.

4. Better to better

5. Creativity.

6. Management Commitment.

Importance of Culture to Quality Management

- High level of commitment to the organization

- High level of job satisfaction
- Low level of industrial stress
- Less conflict between employees and management
- High level of output and efficiency
- Ease of embracing new technologies and minimal resistance to change