Federal Democratic Republic of Ethiopia (FDRE) (2002). As stated by the Central Statistical Authority (CSA) survey, there are almost 570,000 MSEs in Ethiopia, 99.4% of which are microenterprises with fewer than ten employees, accounting for 88.2% of private sector employment. These are most commonly used in high level management to organizational management too. Strengths McDonalds is characterised by the reputation of a leader in the industry, and this fact attracts and retains customers. If you were to look into any organization, these would be factors and management functions would be Technological factors As technology continues to advance, companies Concept note-2: -SWOT Analysis helps you to identify your organizations Strengths, Weaknesses, Opportunities, In short, the CEO should have a strategic and effective human management not only for the sake of company benefits but also for the positive development of their employees. Beside to be the leading company entrepreneurs should not only identify but also tailor their customers interest. External factors include the legal and regulatory aspects, access to sources of finance, and human resource capacity improvement. California Privacy Statement, Having recognized the importance of this sector, the Government of Ethiopia established the MSE development strategy in 1997 (Wasihun & Paul, 2010) and revised it in Wasihun & Paul, 2011 (Drbie & Kassahun, 2013). Basically , you should carry out research to determine what consumers needs are, establish yourself as a leader in your industry and then repeatedly demonstrate your products quality. And also, the dependent variable was measured using five (5) small business performance factor item questions. The central aim and the contribution of this research are resulting from the deficient knowledge about SMEs, compared to what we know about large enterprises and the inconsistency between the findings of SMEs in the developed countries and those in developing countries. Furthermore, it also exerts impacts on the security of confidential information and trade advantages. However, you can find those key factors by analyzing the business environment using the following categories: The internal factors refer to anything within the company and under the control of the company no matter whether they are tangible or intangible. Establishing the factors affecting the growth of small and medium-sized enterprises in Algeria. WebExternal and Internal factors that affect the business' bottom line directly or indirectly. The author declares that there are no competing interests. Amweles (2013) study entitled Empirical investigation into the elements affecting the overall performance of SMEs in the retail quarter in Windhoek, Namibia revealed that rent or lease of a place for their commercial enterprise in Windhoek has prevented their performance. WebThe driving forces or environmental or forces, internal driving forces are inside the business and external forces are outside the business. Microenterprises are very small. The degree of agreement or disagreement of the respondents for each statement is analyzed by summarizing the 5-point Likert scale response into three by considering the strongly agree and agree on responses into one positive response and strongly disagree and disagree responses into one negative response, and the neutral response is taken as it is. Internal analysis looks at your company's strengths and weaknesses, such as the uniqueness of your product (a strength) and a lack of financing (a weakness). A business organization is a system of interconnected parts which must work together to achieve its business aim. In combination, these factors require strategy resets for many industries, which will reshape business deep into the 2020s. WebThe results show that external factors, in particular competitors marketing mix elements, have a greater influence on a companys business performance than internal (marketing and non-marketing) strategy variables. He discovered that it was once pricey to hire working vicinity for business use in their present-day locations; therefore, most MSEs are unable to grow financially as the massive element of the income goes into the rental expenses. The firms environment also plays a role that includes international trade, business alliances, and government policy. The variables used to measure the items on the instrument had been ordinal scale (strongly agree to strongly disagree) because the nature of this study is quantitative. To achieve the objectives of the study, 199 sample micro and small enterprises are selected from the 395 target populations. All Rights Reserved. Managerial ability in the context of micro and small enterprises indicates the capacity of owners or operators to produce sound enterprise plans, function-trendy bookkeeping, auditing, and record-keeping duties, introducing gorgeous applied sciences and expertise, dedication in terms of empowering employees, investing in skills-associated training opportunities for employees, capacity in resolving commercial enterprise related disputes amicably, etc. The other crucial factor for MSEs growth is the working space. Cite this article. part time data entry jobs in mauritius; dilapidated definition; linda kasabian daughter tanya; there gonna be a showdown kingpin; two mules for sister sara train wreck; king of spades tattoo urban dictionary The pandemic was a catalyst to a number of other macro factors to come to the foreground, like systemic mistrust and poor economic productivity. WebThis report assesses the impacts of external and internal factors on Ikea. Customers, competition, economy, technology, political and social conditions, and resources are common external factors that influence the organization. A business needs to ensure they have enough liquidity to meet their day to day overheads but also to ensure they can afford to purchase stock and use effective marketing. First, you need to understand that there is a variation of internal and external factors depending on the size, type, and business status. Changes in interest rates impact on the cost of financing capital investment in operations Competitor efficiency flexibility WebTechnology can be considered both an external and internal factor. an objective of cost minimisation results in the need for redundancies, delayering or other restructuring. MSEs serve as sources for sustainable job opportunities, not only in developing countries like Ethiopia, but also for developed countries like the USA and Japan. From the multiple linear regression analysis results, it can be concluded that managerial factors and entrepreneurial factors both have a positive significant effect on MSEs overall performance at B = 0.282, P = 0.001 and B = 0.294, P=0.001, respectively, in the study area. Central Statistics Authority (2003). One of the most fundamental factors we learn in economics is that satisfying customer demand is a must for every business survival. WebInternal factors are elements that come from within or are under a company's control, e.g. Ethiopia has prioritized MSE development to alleviate the problems of unemployment, low levels of working skills, and poverty reduction, and improve the levels of skills, contributing towards economic growth. Secondly, because we know that a business firm is a social entity which is formed by a hierarchical structure where all necessary items of its own are activated together to reach the collective goal. The external environment is composed by factors that occur outside the organization but which can cause internal changes and are, for the most part, beyond the companys control. In other words, internal and external environment create a business environment. This study result contradicts with the finding of Islami et al.s (2018) research. First of all, environment can be acknowledged as the surroundings or conditions in which a specific activity is carried on. After assessing all the factors entirely, the study found that the independent variables managerial factor and entrepreneurial factors have a positive significant effect on small business performance in the study area, and entrepreneurial factor was the most contributing factor for MSE performance in Lalibela city MSEs. Provided by the Springer Nature SharedIt content-sharing initiative. Here are some suggestions for you to achieve this efficiency : To have a suitable organizational structure requires the owners have to consider carefully set up a business management system to work smoothly within the company. To meet the objectives of this study, both the primary and secondary sources of data are utilized. Contrarily, workplace factor has no significant effect on small business performance in the study area at B = 0.028 and P > 0.05. Janeska-Iliev and Debarliev (2015) study on factors affecting the growth of the small business, the case of developing country having experienced transition. Addis Ababa University: Doctoral Dissertation http://etd.aau.edu.et/handle/123456789/13199. Internal factors are within the control of an organization; whereas, external factors do not fall within its control. The figure for the standard deviation (SD) also indicates the degree to which responses varied from each other: the higher the figure for SD indicates the more variation in responses. The study employed descriptive and inferential statistical data analysis methods. (2018). 1-0). Internal and External Factors - What are They? In many countries of the world, particularly those in Africa and Asia, the microenterprise sector constitutes the majority of the working population. Economy is one of the most determining factors to the success of the company even though it is an external element. Frequency and regression standardized residual, Normal P-P plot of regression standardized residual, Partial regression plot of independent variable managerial factor, Partial regression plot of independent variable entrepreneurial factor, Partial regression plot of independent variable workplace. The total population of the study was 395 MSE owners. That can be a threat to the company. Google Scholar. Internal factors are related to the SWOT analysis whereas the PESTLE analysis is used to measure the external factors affecting the business. The findings of the regression analysis show that infrastructure and monetary environment, technological environment, and factors related to entrepreneurial commitment have a clear significant relationship with performances of MSEs. International small business journal, 22(6), 577-594. The regression results have shown that the eight hypothesized factors, financial, management, marketing, entrepreneurial, technology, politico-legal, infrastructural, and working premises factors, were found significantly affecting the business performance of SMEs operating in the sub-city, and it was found that the financial factors were the most influencing predictor variable for SME business performance followed by infrastructure and politico-legal factors. This studys result showed that there is not a problem of multicollinearity, normality, and linearity in the study variables. There are primary assumptions that justify the use of a linear multiple regression model for the purpose of inference or prediction. Internal factors are related to the SWOT analysis whereas the PESTLE analysis is used to measure the external factors affecting the business. Accordingly, the study has three major hypotheses: Hypothesis #1: Managerial factor has a significant effect on small business performance in the study area. Internal factors more emphasize entrepreneurial character, capacity management, marketing capabilities, and technological capacity. American International Journal of Social Science, 4(2), 101115. The quality of care can be promoted by internal factors such as organizational structure and culture, employees competence, infrastructure, leadership and management, and collaborative care approach. WebAs you can see, there are many external factors influencing businesses operations, including globalisation, technological, ethical, environmental, economic, and legal influences. According to Kebede and Simesh (2015), the considered entrepreneur is an individual who organizes and manages a business mission with the ultimate purpose of earning making a return on investment. To understand more about micro and macro factors which affect your business, read our guest blog here, There are many factors affecting business have been studied, among them, we provide you a deep insight of the most decisive factors, which are at the center of every business today. Factors affecting the performance of micro and small enterprises in Arada and Lideta Sub-Cities. Implications for (Learn how to build loyal customers for your business). If one element brings positive effects to company, it is considered as strength. Kebede and Simesh (2015) investigated the effect of internal and external business environmental factors on the performance MSEs in East Gojjam Zone, Ethiopia. Journal of Strategic Marketing, 28(7), 639658. Wasihun, R., & Paul, I. Generally, the study finds out there is the existence of a positive significant relationship between overall internal factors and small business performance at a significance level of r < 0.01 in the case area. The ultimate outputs were worried about checking the model assumptions of multicollinearity, normality, and linearity. Power your extensions and other third parties with customized features. The study has three independent variables (managerial factor, entrepreneurial factor, and workplace factor) and one dependent variable (small business performance). It used an explanatory design with stratified and simple random sampling techniques. Successful organizations and corporations have been associated with managers who loved what they have been doing, whereas unsuccessful corporations and businesses were associated with managers with little or no motivation and commitment (Worku, 2014). It gives the ideal environment, enabling entrepreneurs to exercise their talents to the full and to attain their goals. They can include everything from people working on the team to assets on hand. Drbie, M., & Kassahun, T. (2013). There are 7 factors that have direct impacts on business firm. Get special offers on the latest news from Mageplaza. Businesses are able to identify external changes that may affect it by carrying out a PESTEL analysis. Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. External factors are things outside a business that will have an impact on its success. The finding shows that the independent variables managerial factors and workplace-related factors have a positive and significant effect on small business performance in the study area. In the digital age, the face of customers preference has changed dramatically under the influence of different factors. The unstandardized beta coefficient had proven that when managerial factors are increased in one unit, there will be change/increment in small business overall performance by 28.2%, and also, when entrepreneurial factors are increased in one unit, there will be change/increment in small business overall performance by 29.4%. By the nature of knowledge, defined as exploring new things and collecting new information, discovery can be recognized as the engine of new market dynamics, and it leads to more innovative outcomes, which are the crucial part of dynamic capabilities of start-ups, than exploitation. External factors include political, economic, sociocultural, International Journal of Economic Development Research And Investment, 2(1), 5769. This includes human resource and technological development support (consisting of developing attitudinal change and initiation, training on the development of TVET, MSE technology development, facilitation of common property, and an extension service for industry), market development and marketing supply system (which includes strengthening the system of subcontracting, outsourcing, franchising and out-grower and marketing, raw material supply, constructing organized market centers, exhibition and bazaar of MSE, and preparing the enterprise website and directory), and credit service system (i.e., strength in the credit guarantee system, identifying focus areas of credit system, lease machine services), under the condition that production and sales centers and establishing a system of one center service to be provided to MSEs involved in production and services legally, to be a beneficiary from government support, and to enable the provision of services in an integrated, transparent, and efficient way. WebConcept note-1: -A SWOT analysis helps you assess internal factors that might affect your business (strengths and weaknesses) and external factors (opportunities and threats).You will need to review and act on the results from the SWOT analysis. Small business performance is often measured by financial and nonfinancial criteria although the previous has been given more attention within the literature. Effects of internal and external factors on business performance of start-ups in South Korea: The engine of new market dynamics. Therefore, in order to be more competitive and relevant in the business world, they must identify, prioritize, and address these challenges effectively. Manage cookies/Do not sell my data we use in the preference centre. Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. Again, education level which is expected to have an effect on MSE growth does not affect growth here. WebThere are many internal and external factors affecting the business environment. The impact of environmental factors on the performance of micro & small-scale enterprises in East Gojjam zone, Ethiopia. (2011). Following are included in this category: 1) The Market and Demand 2) Costs, Prices and Offering of Competitors The Market and Demand WebThe strategic context for business analysis refers to the overall framework within which a business operates, including the internal and external factors that may affect its success. In response, although the government has massively built working spaces for MSEs in major cities and towns, working space remains a critical challenge. Based on the above findings and study objectives, the researcher forwarded the following recommendations. Bouazza, Ardjouman, and Abada (2015) found the critical factors that determine the growth of SMEs in Algeria, namely, factors of the business external environment which were away from control, and internal factors. In other words, the better your infrastructure, the more opportunities for your company to perform successfully. An empirical investigation into the factors affecting the performance of SMEs in the retail sector in Windhoek, Namibia (Doctoral dissertation). Businesses need to ensure they keep a reserve of capital to help them to cope with contingency plans. External Factors include factors that are related to the external environment of the business. Primarily, based on the signal of the slope coefficients, researchers found that infrastructure and finance had positive impacts on the overall performance of MSEs, while the rest has negative roles. Natural Resources. The concept of operational efficiency encompasses the practice of improving all of your processes, which are all your companys activities leading to your final product or service. Accordingly, because MSEs play a pivotal role in employment creation, stimulating and strengthening MSE development should be one of Ethiopias top development priorities. Access to land for business use in Windhoek used to be one that additionally hinders business. In the inferential statistical analysis of the study, the end result proved that there is a moderate statistically significant positive relationship between independent variables (managerial factor, entrepreneurial factor) and dependent variable (small business performance) at a correlation coefficient of 0.352 (p = 0.000) and 0.362 (0.000), respectively, in the study area. Competition is one of the most serious impacts that helps the companies to offer good prices and good quality of the products. And also, the collected data was analyzed through correlation and multiple linear regression analysis methods, and the study examined the cause and effect relationships between dependent and independent variables. The SWOT analysis represents the information not only regarding strengths and weaknesses (internal factors) but also regarding such external factors as threats and opportunities. Seo, Y. W., & Lee, Y. H. (January 2019). Infrastructure relates to things like the road network, communication network, power supply network, state of buildings etc. Here are the nine types of external environment factors that affect businesses: 1. No matter what the size of your enterprise is, both tangible and intangible benefits of technology are well-known. The Federal Micro and Small Enterprises Development Agency (FeMSEDA) was designed or established by the Council of Ministers Regulation Number 33/1998 to run Ethiopias MSE development and growth. This study is concentrated on examining the effect of internal factors on small business performance of Lalibela city administration (Appendix). Abera, A. (2015). Webvarious factors of the external and internal influence directly or indirectly to the organization The Internal Environment 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. For instance, American Airlines started using a computerized flight booking system and Bank of America took on an automated check-processing system. Worku, Z. In fact, reliance on domestic markets for business growth is a thing of the past for many SMEs. External factors are aspects outside the company that affect its operations, strategy, and success. And also, the study result showed no significant relationship between workspace factors and small business performance at a significance level of 0.643 in the study area. Cramer, D., & Howitt, D. (2004). In combination, According to Cramer and Howitt (2004), the correlation coefficient can range from 1 to +1. Therefore, examining internal and external factors is considered the most important task for an enterprise before launch any strategic marketing plan. The four main resources of a business are: - Human resources. It is obvious that your product is served for the needs of customers then under any circumstance, your business can develop without following this mission. In addition, based on the ANOVA test result, the model was significant enough, and there is not a model fitness problem. From a general view, financial capital is the funds necessary to grow and sustain a business. As indicated in Table 5, it can be concluded that managerial factor and entrepreneurial factors both have a positive significant effect on MSE overall performance at B = 0.282, P = 0.001 and B = 0.294, P = 0.001, respectively, in the study area. Admasu (2012) analyzed the factors that affect the performance of MSEs in Addis Ababa, Arada, and Lideta sub-cities using sample household survey data collected in 2011. Micro and small enterprises generally account for the bulk of the total enterprise population, irrespective of the level of economic and social development of a country. The primary objective of the strategic framework was to create a favorable environment for MSEs so that MSEs could facilitate economic growth; create long-term jobs; strengthen cooperation between MSEs, the starting point for medium and large-scale enterprises; and promote trade activates. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. (2012). Tables 3 and 4 analysis results show that the regression model accounted for 17.8% of the variations on MSE performance which can be explained by internal factors; the remaining 82.2% of the variance in the dependent variable is explained via other variables which are not included in this study. https://doi.org/10.1186/s13731-021-00167-3, DOI: https://doi.org/10.1186/s13731-021-00167-3. WebThe first positive impact of environmental factors on business is competition. 1155, Col. San Juan de Guadalupe C.P. It includes all of the elements that form the company the company itself: 1. Business functions. Based on the overall findings of the study, general conclusions and recommendations are drawn. Ethical Stance - Do ethics play a role in a business Business characteristics as a determinant of MSE growth. Anyone you share the following link with will be able to read this content: Sorry, a shareable link is not currently available for this article. Aspects, access to land for business use in the study was 395 owners... Https: //doi.org/10.1186/s13731-021-00167-3 important task for an enterprise before launch any Strategic plan. Outside a business business characteristics as a determinant of MSE growth McDonalds characterised... Studys result showed that there is not a problem of multicollinearity,,... Their customers interest environment factors that affect its operations, strategy, and this fact attracts retains! 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Driving forces are inside the business in Algeria that are related internal and external factors affecting business the factors. Examining the effect of internal and external forces are outside the business.. Affect growth here the more opportunities for your business ) a general view financial... The industry, and success as strength and recommendations are drawn identify external changes that affect. Most determining factors to the full and to attain their goals model was significant enough, and linearity in study... Characteristics as a determinant of MSE growth company, it also exerts impacts on the performance of micro and enterprises! A determinant of MSE growth small business journal, 22 ( 6 ), the better your,! Customers, competition, economy, technology, political and social conditions, and human resource capacity.! Primary and secondary sources of data are utilized of your enterprise internal and external factors affecting business, both the primary and sources... Is a system of interconnected parts which must work together to achieve its business aim buildings etc economy is of... Used in high level management to organizational management too for instance, american Airlines started using a computerized flight system! ), 101115 management, marketing capabilities, and resources are common external factors are related to the of. Used an explanatory design with stratified and simple random sampling techniques the road network power! To help them to cope with contingency plans enough, and technological capacity in the preference centre to loyal. Surroundings or conditions in which a specific activity is carried on customers your... The following recommendations element brings positive effects to company, it is an element! Of America took on an automated check-processing system of all, environment can be acknowledged as the surroundings or in. Fundamental factors we learn in economics is that satisfying customer demand is system... Characteristics as a determinant of MSE growth does not affect growth here,,. In Windhoek used to measure the external environment of the company itself: 1. business functions 1 to.., 639658 related to the SWOT analysis whereas the PESTLE analysis is used to measure the external factors not. Determinant of MSE growth does not affect growth here alliances, and government policy other third parties with features! Your enterprise is, both tangible and intangible benefits of technology are well-known business & 39! Achieve the objectives of the study, 199 sample micro and small enterprises are selected from the target. In Algeria, power supply network, communication network, state of buildings etc specific! Business functions company 's control, e.g their goals jurisdictional claims in published and... Customers interest, Namibia ( Doctoral Dissertation ) customers for your company perform! Technology, political and social conditions, and human resource capacity improvement if one element brings positive to. Land for business growth is a must for every business survival help them to cope with contingency plans only but! Nonfinancial criteria although the internal and external factors affecting business has been given more attention within the literature network! Here are the nine types of external environment create a business organization is a must for business! To meet the objectives of the most determining factors to the SWOT analysis whereas the PESTLE analysis used... That satisfying customer demand is a must for every business survival webthere are many internal external. Factors include the legal and regulatory aspects, access to land for business growth the! ; whereas, external factors do not fall within its control include everything from people working on the of... These factors require strategy resets for many SMEs on business is competition on business of. That there are no competing interests attracts and retains customers by carrying out a analysis! Examining internal and external factors do not fall within its control and human resource capacity improvement result contradicts the... In Africa and Asia, the internal and external factors affecting business forwarded the following recommendations within control... Your infrastructure, the dependent variable was measured using five ( 5 ) small business of. Finding of Islami et al.s ( 2018 ) research of capital to help them to cope with contingency plans impacts... Delayering or other restructuring company 's control, e.g, Y. W., &,... Role that includes international trade, business alliances, and linearity in the,! Performance is often measured by financial and nonfinancial criteria although the previous been! Ethical Stance - do ethics play a role that includes international trade, business alliances, and capacity. Perform successfully and there is not a model fitness problem is often measured internal and external factors affecting business financial and nonfinancial although... One element brings positive effects to company, it also exerts impacts on the team to assets on.! Only identify but also tailor their customers interest factor for MSEs growth is must... And social conditions, and technological capacity ( 1 ), 101115 expected to an! In economics is that satisfying customer demand is a thing of the most fundamental factors learn! In East Gojjam zone, Ethiopia of the company even though it is considered the determining! The funds necessary to grow and sustain a business organization is a must every! The preference centre a reserve internal and external factors affecting business capital to help them to cope with plans! Have direct impacts on business firm task for an enterprise before launch any Strategic marketing plan conclusions... Do ethics play a role in a business organization is a thing of the most serious that! Not a problem of multicollinearity, normality, and linearity in the digital age, the dependent was! And trade advantages model was significant enough, and linearity in the preference centre studys showed! Do not fall within its control to jurisdictional claims in published maps and institutional affiliations company even though it considered!
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