Introduction
This report is a detailed study of the impact of the internal and external factors that affect the business. Every business organization is affected by one or other factors directly and indirectly. No business can move forward without the influence of the internal and external factors. The factors may be favorable as well as unfavorable for the business. In both the cases the business will have to frame policies inorder to make the best result from it. If the situation is favorable the business should frame strategies to make the most of those benefits. “The firm must continuously monitor and adapt to the environment if it is to survive and prosper.” (Business environment, Gemmy Allen, 1998, management modern). Similarly if the situation is unfavorable for the business the strategies should be such that the business is protected against adverse situations.
This report is a study of the internal and external factors affecting the electronics major Sony Corporation. Sony Corporation is one of the world’s leading electronics major. The company is well known for the quality and technology of the products it supply. The company is into various electronic goods segment. Sony has excellent brand value in the market and the high reputation has benefited the company with more profits. But like any other business or company Sony is affected by various factors both from outside as well as from inside the organization. The report clearly looks into both the factors and also studies in detail how the company has responded to such factors and how they will respond in the future. It is the fast changes in technology that makes the electronic goods companies to launch new products regularly in the market. Since technology is one of the most influencing factors for Sony, the impact of changes in the technological scenario on its business is analyzed in detail.
Organizational profile
The organization selected here is electronic goods major Sony Corporation. The Company is headquartered in Tokyo. Sony Corporation is a company that is engaged in different business sectors. The company is engaged in businesses areas like electronics, music, movies, financial services etc. “The electronics segment consists of products such as computers, handhelds, peripherals, portable audio, mobile phones, recordable/storage media, and other electronics.” (Sony Corporation, business description, 2008).
Electronics is the major business sector in which it is involved. With its presence in different business sectors and different countries Sony is one of the richest companies in the world. Sony is also regarded as one of the best entertainment companies in the world. Sony has been very successful in the sector by its excellent branding strategy. It has adopted better branding strategy for its products which has brought in very wider customer acceptance. Sony’s ‘walkman’ series phone and ‘vaio’ series laptops are examples of certain brands of Sony. “Great quality, processor and construction that is typical from Sony Vaio’s. Great Value and Price. Outstanding Screen.” (Sony VAIO N Series VGN-N220E/B Laptop Computer, Standard Great Value from Sony Vaio N220 Laptop, Strengths, 2008). The customers believe that there is a perceived value for the products of Sony.
The company gained this trust of the people through continues effort of better branding and marketing strategies. The marketing strategies of the company have been in accordance with the changing business environment it operates. Business environment includes the internal and external factors that affect the operation of a business.
Literature review
The environment in which a business operates is termed as business environment. The business environment is not stable. It keeps ion changing in accordance with various factors. Therefore an organization should keep on updating its strategy inorder to survive in the changing environment. Business organizations use various tools inorder to frame strategies for the changing environment. The changes in the environment may result to be threat as well as opportunities for the organization. A firm that is successful will always keep an eye on the opportunities and threats of the business.
The environment of a business can be classified into two on the basis of its scope and area of emergence. The two main factors that affect the existence of a business are internal and external. As the name signifies internal factors are those that exist inside the organization. The changes that take place in the internal components of the business influences the organization in certain ways. External factors are those that are outside the organization. The changes in the external components will also affect the organization in different ways. “It consists of all the outside institutions and forces that have an actual or potential interest or impact on the organization’s ability to achieve its objectives” (Business environment, external environment, Gemmy Allen 1998, Management modern). As a result of Globalization most of the business organizations are exposed to a global competition. The changes in the technology and other factors have made the business organizations to focus more on framing varied strategies for survival. The internal and external factors that affect the business are enumerated in detail below.
Internal factors
The internal factors that affect the business are those factors that arise from within the organization. The internal factors are mainly concerned with human resources, the financial position and other factors that are internal to the organization. Sony Electronics is an electronic goods company and its business is affected by various internal factors. The internal factors that affect Sony Corporation in its business can be as follows.
Employee grievances
Employee grievance is one of the most important internal factors that can affect the company in its operation. Employee grievance refers to the problems of the employees that hinder them to perform well. An employee is a social being and he is supposed to be influenced by many factors around him. An employee may have problems related to his work and work place and may also have problems at his family level. Both will affect the performance of the employee in the organization. Employee grievances will result in low performance, higher absenteeism and higher labor turnover. If the management does not take sufficient measurement to solve the employee grievances it will ultimately affect the productivity of the organization.
Lack of knowledge
In certain cases the employees may lack knowledge of performing any particular activity. When the employees lack knowledge of the job their motivation level will come down which will result in lower productivity. Lower productivity of the employee will finally lead to lower productivity of the organization.
Interpersonal conflict
Interpersonal conflicts or disputes are common in most of the organization. It can occur in different forms such as conflict between employers and employees, employees and employees and employers and employers. All the three are hazardous for the organization. An employee-employer conflict is common in most of the organizations. These are to be carefully dealt by the company as it will lead to wastage of time and resources of the company.
Resistance to change
Many employees feel it difficult to accept any changes in the organization mainly due to the fear of loss of job. “Resistance to change is the action taken by individuals and groups when they perceive that a change that is occurring as a threat to them.” (Resistance to change, definition, 2007). Resistance to change will normally result in employee –employer conflict in the organization. Resistance to change must be dealt with properly by the organization by providing better training facilities for the employees to make them adapt to the changed environment.
Changes in the financial position
Any change in the financial structure or composition of the company will affect the company’s profitability. When the financial structure is not stable, it becomes unable for the company to arrange fund for the marketing and other activities. Therefore a better financial structure is very much essential for the company in monitoring all its other activities. Instability in the financial structure can make the whole system stagnant.
Lack of technically qualified employees
This is another internal factor that affects the better functioning of an organization. Since Sony is an electronic company the company has to be very keen on launching new products with the most modern features. Inorder to equip better features for the products the company should have technically qualified employees at large. Only then the company can develop new technologies at their Research and Development facility.
Higher turnover of qualified employees
This is one of the serious problems that can affect any organization. If the highly qualified employee who has worked in the managerial level or in the research and development facility of the company leaves the organization to join the competitor company, the company will not be able to make use of its strategies best. The strategies of the company will be known by the competitor and they will market their products with similar strategy.
Apart from the internal factors the company is also affected badly by certain external factors. The external factors that might affect the company are as follows.
Strategies of the competitor
To be successful today, every company must be competitor oriented. To survive in such a competitive world has become a big deal for every company. We can say that competition is the major factor which can effect in either ways i.e., opportunity or threat. “With the enormous competition markets today are driven by choice. The targeted customers have too many choices, all of which can be fulfilled instantly. Competition through innovation supported by different strategies is thus important than price competition.” (The art of effective competition, Vadim Kotelnikov, 2008). If the company allows itself to lag behind in the race to generate new and innovated goods and services, then it is obvious that the company cannot survive in such a competitive world.
To be the dominant player in market, the industry should possess substantial market share, adapt new technologies, innovative business processes and above all every company must offer a superior solution to a customer’s problem. Every industry is a huge industry trying to stand out from each other by delivering the best customer value and satisfaction than its fellow competitors. Sony survives in the market through its continuous innovation in the products. Thus they are able to grab a distinctive name among the competitors. The first plug-and-play Plasma WEGA TV was introduced by Sony. Similarly it also introduced desktop videoconferencing system for the first time in the market. If the competitors of Sony start introducing products that are technologically more advanced than that of Sony it will definitely affect the market share of Sony. Therefore the strategies of the competitors are one of the most important external factors that affect the business.
Economic factors
Aspects of the economy, such as inflation, interest rates and rates of unemployment must be considered by the management for decision making. Economy is an essential factor in this worldwide trend. Any changes in the economic factors of a country are likely to affect the business organizations operating in that country. The changes in factors like inflation, GDP, etc, are some of the economic factors that affect the business. From hardware to software, Sony builds itself as an industrial kingdom. Sony can colonize other countries, which could not stop the overwhelming power of Sony’s products. Beginning with electronic products, Sony builds a market in the record field as well. When Sony enters a new market or country the profitability of Sony in that country also depends upon the economic factors prevailing there.
Political factors
Political factor is another important external factor that affects the business. “Laws are the primary way in which political factors affect a business. A business must respond to laws and regulations on the local, state, and federal levels.” (Management, Political factors, page 70, By Patrick J. Montana, Bruce H. Charnov, Barron’s educational series, 2000) The political condition of a country usually undergoes frequent changes. Any uncertainty in the political condition of a country will result in making the whole system of a country stagnant. This is a highly unfavorable environment for the business. Frequent changes in the government will result in frequent changes in the rules, regulations and governmental policies. When the governmental policies changes continuously the business will have to change its policies in accordance with that. Every business has to monitor the changes in the government and political factors so that it can adapt its business in accordance with the changes.
Legal factors
Legal factors affecting a business are closely associated to the political factors. “The legal environment serves to define what organizations can and cannot do at a particular point in time.” (Macro environmental forces, Political and legal factors, Thompson Gale 2006). Legal factors refer to the changes in the rules and regulations of the country in which the business operate. Every business is bound by the rules and regulations of the country in which it operate. The rules of a country governing business or any others may change due to certain reasons. The rules may be regarding the sale of any particular goods or providing any services. Changes in rules will make the company change its strategy in accordance with the new rules. Changes in the legal factors and changes in the government are interrelated. When Sony enters different markets, it has to comply with the rules and regulations of that country so that the business runs properly.
Socio-cultural factors
This is another important external factor that affects the business. Socio-cultural factors refer to the social and cultural factors that affect the business organization. “The social and cultural influences on business vary from country to country. It is very important that such factors are considered.” (PEST Analysis, Sociocultural factors, 2008).
The social and cultural factors are different for different countries. The social factors are even different for different regions of the same country. Therefore socio-cultural factors have great influence on the business. The products and services of a company should be acceptable to the culture of the people of the country of the region. Apart from the product the promotional methods such as advertisements should be very cautiously managed. Any promotional method that opposes any religious believes of the region should not be adopted by the company. Sony has to be extremely cautious on the promotional methods that it adopt for different countries.
Impact of technological change
Technology is one of the most influencing factors in every business. Technological change is very much crucial in the case of Sony as it is an electronic goods company. Electronic goods get influenced by changes in technology very easily. An electronic product gets outdated when another product with better technology arrives in the market. The impact of technological change on Sony is explained as below.
Impact on decision making
Technological change has high influence on the decision making of Sony. Sony is the market leader in its sector. Based upon the changes in the technological arena Sony will have to change its strategy regarding its product development and marketing. Technology is not stable and it will change continuously. A new product of Sony will become outdated when similar product with better technology is being launched by any other company. The decision of the company regarding the marketing of such products has to be changed in such cases. Sony will also have to take decision on investing in research and development facilities. This will help Sony to introduce products with advanced technology.
Sony had always been very much cautious during the changes in the technology. Whenever the company forecasted any change of technology in the future it formulated strategies at a very early stage inorder to withstand the expected competition. Launch of the first flat screen TV by Sony is an example of Sony’s response to the technological change. “In 1998, Sony boldly changed the television landscape by introducing the industry’s first flat screen CRT television, the FD Trinitron WEGA.” (Sony celebrates 5th anniversary of the WEGA TV, beststuff.com, 2008). The innovations of Sony has not only helped themselves but also the whole industry. Many companies introduce products with technologies that are actually introduced by Sony. As a response to the technological advancement Sony has launched around sixty varieties of TV’s. Sony is the only company that provides widest range of advanced TV’s in the market.
Conclusion
The report has given better idea about what the business environment is how much a business is influenced by changes in the business environment. This report was done on the basis of Sony Corporation which is the market leader in the electronic goods sector. Even though the company is the market leader and has presence in world markets, its business is influenced by the changes in the environment in which it operates. The various internal and external factors that may affect Sony have been discussed in detail.
Since the internal factors are mainly related to human resources, the issues that are likely to affect can be resolved through a better Human Resource practices in the company. The employees of the company have to be given proper consideration as the performance of the organization is highly affected by their performance. A standardized HR practice will help Sony to maintain high quality individuals within the organization. Since the existence of Sony is influenced greatly by the Research and Development conducted by its technical employees, they are to be highly motivated to yield even better results in future. Similarly highly qualified employees have to be hired by the company inorder to manage the company in the challenging environment.
Sony will have to update its strategies according to the changes in the environment. Since Sony is the ruler of the business sector, it is highly aware about the pulse of the market. The impact of any possible change in the external environment on the business can be predicted by the company with the help of its expert team. Thus in the present context Sony will continue to be the best brand in its sector. It will bring in new and advanced technologies in the future to challenge the changing environment.
References
Business environment, Gemmy Allen, 1998, management modern. Web.
Sony Corporation, business description, 2008. Web.
Sony VAIO N Series VGN-N220E/B Laptop Computer, Standard Great Value from Sony Vaio N220 Laptop, Strengths, 2008. Web.
Business environment, external environment, Gemmy Allen 1998. Management modern. Web.
Resistance to change. Definition, changingminds. 2007. Web.
The art of effective competition. Vadim Kotelnikov. 2008. Web.
Management, Political factors, page 70, By Patrick J. Montana, Bruce H. Charnov, Barron’s educational series, 2000.
Macro environmental forces. Political and legal factors, Thompson Gale 2006. Web.
PEST Analysis, Sociocultural factors, 2008. Web.
Sony celebrates 5th anniversary of the WEGA TV, 2008. Web.