HOW ARE SMALL BUSINESSES INFLUENCED

INTERNAL INFLUENCES

LEARNING INTENTIONS AND SUCCESS CRITERIA

LEARNING INTENTIONS:

I understand how

INTERNAL FACTORS

can influence business

activities and success.

SUCCESS CRITERIA:• I can explain how the amount of

finance available can have a positive and negative impact on a business.

• I can explain how the skills and attitudes of staff can have a positive and negative impact on a business.

• I can explain how the sophistication and amount of technology available in a business can have a positive and negative impact on a business.

• I can explain how management decisions can have a positive and negative impact on a business.

WHAT DECISIONS NEED TO BE MADE?

To be successful and prevent failure, a business will have to make DECISIONS about the best ways to deal with the following issues.• SATISFYING CUSTOMERS• CONTROLLING COSTS• MANAGING RESOURCES• REACTING TO THE MARKETINTERNAL FACTORS are one of the main issueswhich can create the need to make such decisionsand also influence their results.

WHAT IS AN INTERNAL FACTOR?

INTERNAL FACTORS are things INSIDEA BUSINESS that affect the way that itoperates. The business has control overthese. These factors can include:• FINANCE AVAILABLE• Skills of STAFF• Use of TECHNOLOGY• Skills of MANAGEMENT

FINANCE AVAILABLEWhen a business has LOTS of finance (money) then it can make decisions that will help it survive by maximising consumer satisfaction. Examples of positive decisions which can be taken when plenty of finance is available are:

• Choosing to carry out market research to help design appropriate products

• Deciding to offer low prices to encourage consumers to buy• Deciding to use expensive and popular locations to sell

products• Deciding to run promotions to let consumers know about

products• Choosing to use quality raw materials and factors of

production• Deciding to train staff to improve their skills

FINANCE AVAILABLE

If a business DOES NOT have lots of finance availablethen it will have to make the following less helpful decisionsabout its activities.• Deciding to use cheap and unpopular locations to sell

products• Deciding to run few promotions to let consumers

know about products• Choosing to use low quality raw materials and factors

of production• Choosing to cut back on training of staffThese decisions can lead to less customer satisfaction, less wealth and less chance of being a successful business.

SKILLS OF STAFFHaving LOTS of skilled and committed staff in a business will bring thefollowing benefits:• Staff will make high quality decisions for the benefit of the

business• Staff will be enterprising and develop new products• Staff will work to a high standard and produce high quality

products• Staff will work quickly and make products in time for

customers• Staff will be flexible and so help to produce lots of types of

product• Staff will treat customers well and offer high levels of customer

satisfaction

On the other hand, if a business does not have a skilled and committed staff then the opposite of the above will be true.

STAFF ATTITUDEIf the staff become unhappy with decisions made about their treatment In the organisation then they may take action which negatively affects it by reducing production. These actions are known as INDUSTRIALACTION. Examples of industrial action include the following.

• STRIKE (this means staff refuse to come to work at all and production goes down)

• WORK TO RULE (this means they only do what their contract says)• PICKETING (employees trying to persuade others to join their

strike)• GO SLOW (staff do their job a slowly as the can get away with to

lower production

USE OF TECHNOLOGY

Using lots of technology and mechanisation in a business can have the following benefits:• Products will be made to a high standard by

the machinery• Products will be made quickly for consumers

by the machinery• Costs can be cut by replacing staff with

machines that don’t need paid• Machinery/technology can improve

consumer service (eg support websites)

USE OF TECHNOLOGY

Using lots of technology can also have a negative impact,as follows:• Machinery can be expensive to buy which might limit

access to it• Machinery will have maintenance costs• Machinery can break down and stop production• Machinery cannot be enterprising and come up with

new ideas• Consumers may not like using machines (eg

automated help lines)• Staff may not be happy being replaced by machines

and take industrial action

SKILLS OF MANAGEMENT

Managers make all the decisions in the

business. If the decisions they make are

good, the business will be successful.

However, if they make bad decisions, the

business may lose customers, wealth and

market share.

TASKS

Complete Worksheets 16 and 17 in your

jotters.