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Internal factors affecting businesses

Internal factors affecting businesses

This article aims to identify and assess the key internal factors affecting businesses. Different types of businesses have different needs when it comes to growth. External factors like competitors or economic conditions can be influential; however, they do not necessarily tell the whole story about what it takes for a business to succeed. Internal factors are often overlooked but can play an even more significant role in determining whether a company succeeds or fails.

Examples of internal factors affecting businesses

There are usually three key internal factors that can affect a business both positively and negatively. They are human resources (employees/workers), finance, and current technology (BBC, 2022). Other examples of internal factors are company culture, leadership, and physical environment. This post will take an in-depth look at these internal factors that can impact on businesses differently depending on their situation.

Human resources

There is no doubt that employee engagement is a key element of success for any business. This can be measured by many factors; however, usually by looking at how many employees are actively using their skills at workplace and how much they enjoy what they do.

Engaged employees stay with a company longer as they are usually happy with how their work is influencing the world and with their colleagues. Companies that are highly engaged should not be looking for ways to cut costs at the expense of the employees as employee retention should be at the top of their list.


It is no secret that many businesses struggle to find funding. Some businesses can raise money from family and friends while many others struggle to find investors. Internal factors like company culture, employee engagement, data, technology, and leadership can sway investors one way or another. It is, therefore, very important to take them into account before approaching an investor.

A business plan is very important to raise finance. There are different types of finance options available to a business. For instance, business angels, invoice factoring, family and friends, grants, bank loans, credit cards, overdraft, and trade credit are very popular options for small businesses (ACCA, 2022).

Current technology

The ability to gain insight, understand behaviour, and ultimately make data-driven decisions is a core advantage for growing businesses. Technology is an important factor for any business; however, for startups it is especially critical because it can provide a level of insight that is often almost impossible for managers to see on their own.

Technology can help businesses gain critical insights about their operation, sales, and marketing activities. With analytics, they can understand the big picture. For example, a business can analyse data to see how many emails its customers have opened and how many are still unopened. With this information, the business can improve its email marketing strategy to increase the number of opened emails and increase customer retention.

Technology can sometimes be expensive though. Therefore, it is often difficult for small organisations to implement advanced tech systems. Advanced tech systems require organisations to have skilled members of staff as well.

Company culture

A company’s culture is a combination of factors that affect employee behaviour. It is made up of values, beliefs, and norms that create an environment where people want to work. Culture is difficult to define and even more difficult to change. Companies that are growing and those that are struggling to adapt to the ever-evolving business landscape cannot afford to ignore the importance of culture.

Understanding own culture is indeed very important for organisations. Let’s take a look at McDonald’s culture which is well expressed in its five core values i.e. Serve, Inclusion, Integrity, Community, and Family (McDonald’s, 2022). The company makes business decisions in line with its core values. These values also guide employees in their daily operational activities.


Leadership is an important factor that can help determine the success of any business. Leaders inspire and create an environment where employees would love to work. However, it is important for leaders to look at themselves and their own practices to improve their leadership skills. They should also look outside of their own organisation to understand best practices in other organisations and industries.

Leaders cannot understand every situation, and they cannot control every outcome either. They can, however, prepare themselves for the inevitable challenges that will arise. They can also empower their employees to solve those challenges.

Steve Jobs, Mark Zuckerberg, Elon Musk, Jeff Bezos, and Bill Gates are some of the most successful business leaders in modern history. They have been instrumental to the enormous success their organisations have achieved. Their visualization skills and leadership styles have transformed their organisations, though some of them have been criticised for some of their decisions.

Physical environment

Another internal factor that is often overlooked is the physical environment of a business. The physical environment might take many forms: cleanliness, decor, logo etc. which can positively or negatively affect a company’s overall success. Especially, in hospitality industry, its importance is paramount.

Summary of Internal factors affecting businesses

It is very clear that there are some key internal factors that can affect a business negatively or positively. It is therefore important for businesses to identify and understand them so that they can develop and implement strategies in line with them.

Hope you have liked this article: ‘Internal factors affecting businesses’. Please share the article link on social media to support our work. You may also like:

External factors affecting businesses

Factors affecting economic growth

Last update: 19 August 2022


ACCA (2022) Small businesses, available at: (accessed 18 August 2022)

BBC (2022) Internal factors, available at: (accessed 18 August)

McDonald’s (2022) Our mission and values, available at: (accessed 18 August 2022)

Author: Joe David

Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.

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