Internal and External Factors Affecting Companys Performance

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Table of Contents

Introduction
Internal factors affecting the performance of a company
External factors affecting the performance of a company
Conclusion
Reference List

Introduction

Organizations are reflective of a conglomeration of different factors within and outside its setting. The success of any organizations is always accredited to the good leadership style employed by the top executives.

However, the performance of an organization depends upon a variety of factors including internal as well as external factors. Internal factors may include management strategy adopted by the company while external factors entail issues such as government policy, competition and globalization, as well as the general environment within which an organization operates.

Top managers perform a pivotal role in the management of any organization through their role of devising strategies as well as formulating policies guiding the companys operations towards achieving the set goals and objectives (Hanson, 2008; Sadler, 2003). Besides, they also have a mandate of directing and coordinating the overall operations of companies.

Through their controlling and leading role, the managers are responsible for allocating resources to various departments in addition to leading the other people in the management team to effectively carry out their duties. Consequently, the top managers greatly affect the performance of the organizations.

However, other stakeholders such as management team, government as well as the industry are equally important in the performance of the firm (Hooke, 2010).

Internal factors affecting the performance of a company

The strategic leadership theory holds some facts as far as the link between top managers and organizational image and performance is concerned. To begin with, the executive managers are involved in offering leadership roles that propel the performance of their organizations. As leaders, the executive managers design the company goals and objectives that are meant to steer the operations of the firm (Hooke, 2010).

Furthermore, the managers formulate policies as well as devising strategies to ensure that the designed goals and objectives are achieved. The company is therefore governed by the policies formulated as well as strategies adopted by these managers (Minichilli et al, 2010).

The policies therefore govern every facet of the company operations including relationship among the employees within the company, their relations with the superiors as well as the customers. Consequently, the operations of an organization are immensely affected and so is its performance (Minichilli et al, 2010).

On the other hand, strategies adopted by the executive managers also have direct impact on the performance of an organization (Richard, 2009; Sadler, 2003). According to Richard well informed managers have the ability to shape the organization they lead (16). The management strategies implemented determines to a large extent the competitiveness of a firm compared to its opponents in the industry.

Hitt et al (2009) argue that a companys competitive ability is enhanced when the managers establish as well as implement strategies that add value to the company (4). For instance, such competition was witnessed between Airbus and Boeing where both the companies adopted different competitive strategies to not only survive in the market but also make profits.

Airbus introduced super jumbo with a large capacity while its competitor chose a medium-sized plane with a passenger capacity but efficient thereby winning the competitive battle (Hitt et al, 2009).

Generally, Richard concludes that such authority to make decisions on behalf of the company is only left for the top managers in centralized organizational systems but delegated to lower organizational levels in decentralized systems (Richard, 2009).

Executive managers are also bestowed with an important role of controlling the allocation of resources within the organization. They therefore have the authority over the distribution and allocation of resources to the various company departments (Jing and Avery, 2008).

Well-informed managers would ensure equitable distribution of such resources which in turn improve the performance of the farm as each departments requirements is taken care of. However, poor resource allocation would create scarcity of such vital requirements in some departments thereby impacting negatively on the organizational performance (Jing and Avery, 2008).

The executive managers are therefore conferred with the authority and power to allocate essential resources as well as create rules that govern such allocation. Consequently, the top managers have a direct impact on the performance of a company.

However, Golsorkhi et al (2010) takes a different perspective concerning such powers (111). They argue that the managers power is regulated by the norms of a proper conduct as shared by their counterparts as well as junior employees within the organization (Golsorkhi et al, 2010).

They reiterate the interdependence of organizational structure and the agency as stipulated in the structural theory. According to the theory, the resources are controlled by the existing rules and regulations which happen to form a social system (Golsorkhi et al, 2010).

External factors affecting the performance of a company

The performance and reputation of a company is also accredited to other factors apart from the management strategies adopted by the top managers. These external forces may force the companies to adopt certain strategies that would affect their performance positively or worse still, negatively.

At the outset, political forces may compel an organization to adhere to the laid laws such as tax laws and environmental compliance (Ofosu-Amaah, 2000). These legislations will shape the company to be socially as well as environmentally friendly hence improving its public image and reputation (Ofosu-Amaah, 2000).

Moreover, governments may decide to offer subsidies to organization in which they have ownership in an attempt to increase their productivity as well as sustain employment in those companies.

For instance, nations such as France, Spain and Germany have acquired ownership in the Airbus thereby ensuring that the company prospers in business thereby curbing the heightened unemployment rate (Hitt et al, 2009). However, elevated taxes levied on the organizations may eject them from their operations.

On the other hand, ecological perspective refutes the fact that organizational success is wholly accredited to the top managers but to the environment within which the organization operates. The environment here may include such factors as globalization and competition (Pine and Davies, 1999). In the recent past, there has been an augmented interdependence between different economies as well as organizations.

Such relations have improved the performance of the involved organizations as they can exchange modern management strategies as well as innovations necessary for both their survival as well as profitability. Conversely, competition has impacted on the performance of different organization in the same industry (Pine and Davies, 1999).

Through competition, companies have resorted to mergers in order to overcome the business hurdles currently witnessed in the competitive market. Such merger enables the organizations to learn from others management strategies as well as tackle pertinent and complicated issues in the industry together (Hanson, 2008).

By adopting other successful organizations strategy, the companies in competition are able to improve their performance enormously (Hitt et al, 2009).

Conclusion

Organizations are reflective of a collection of a variety of factors within and outside its setting. To begin with, the performance of any organization is influenced by the management strategy adopted by the management team as well as other external factors including the general environment within which it operates competition, globalization as well as government policies such as tax laws.

Reference List

Golsorkhi, Damon et al (2010) Cambridge Handbook of Strategy as Practice. Cambridge. Cambridge University Press.

Hanson, D. (2008) Strategic Management: Competitiveness and globalization. 3rd edition. Asia Pacific, Thomson.

Hitt, Michael et al (2009) Strategic management: competitiveness and globalization: concepts & cases. 8^th edition. Florence. Cengage Learning, Inc.

Hooke, Jeffrey (2010) Security Analysis and Business Valuation on Wall Street + Companion Web Site: A Comprehensive Guide to Todays Valuation Methods. 2^nd edition. New York. John Wiley and Sons.

Jing, Fenwick and Avery, Gayle C. (2008) Missing Links In Understanding The Relationship Between Leadership And Organizational Performance. Sidney. Macquarie University. 7(5). 67-78.

Minichilli, Alessandro et al (2010) Top Management Teams in Family-Controlled Companies: Familiness, Faultlines, and Their Impact on Financial Performance. Journal of Management Studies. 47(2) 205222.

Ofosu-Amaah, Paati (2000) Reforming business-related laws to promote private sector development: the World Bank experience in Africa. Washington DC. World Bank Publications.

Pine, Joseph and Davies, Stan (1999) Mass customization: the new frontier in business competition. Harvard. Harvard Business Press.

Richard, L. (2009) Organization Theory and Design. 10^th edition. Florence. Cengage Learning, Inc. 2009 p16.

Sadler, Philip (2003) Strategic management. 2^nd edition. London. Kogan Page Publishers.

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