Internal Environment
The main internal factors which influence business decisions are as follows :
- Culture: The values, beliefs and attitudes of the founders and top management of the company exercise a strong influence on what the company stands for, how it does things and what it considers important. When the value system is shared by all the members, the organization is likely to be more successful. The value system of Narayana Murthi and its acceptance by those at the helm of affairs have been responsible for the high ethical standards of Infosys Technology. Similarly, the strong culture have contributed to the success of Wipro Corporation and Tata Steel (formerly TISCO).
- Mission and Objectives: The business philosophy and purpose of a company guide its priorities, business strategies, product market scope and development process. The mission of Dhirubhai Ambani to make Reliance the biggest group in the private sector prompted him to launch world scale plants in petrochemicals and other industries. Ranbaxy’s mission “to become a research based international pharmaceutical company” led it to enter foreign markets. Similarly, mission and purpose of other companies have guided their thrust area and portfolio strategy.
- Top Management Structure: The composition of the board of directors, the degree of professionalization of management and the organisational structure of structure of a company have important bearing on its business decisions. The board of directors sets the direction and monitors the performance of the company. Companies having highly qualified and responsible boards outperform those lacking such boards of directors. Sound management structures and styles facilitate timely decision-making. The shareholding pattern of a company also influence its functioning. Some companies are closely held (like Wipro) where the promoters hold majority of the shares. Nominees of financial institutions may exercise control over decision-making when the financial institutions have large shareholding in her company. Lord Swaraj Paul could not acquire control over DCM and Escorts due to the support extended by financial institutions to the promoters of these companies.
- Power Structure: The internal power relationship between the board of directors and the chief executive is an important factor. The extent to which to management enjoys support of shareholders and employees at different levels also has an important bearing on decision-making and working of the company.
- Company Image and Brand Equity: The image and brand equity of the company play a significant role in raising finance, forming alliances, choosing dealers and suppliers, launching new products, entering foreign markets, etc.
- Human and Other Resources: The competence, morale and motivation of employees play a vital role in the success of the firm. Tata Steel could could easily carryout a large scale modernization and restructuring. Some companies face great difficulty in carrying out such programmes due to strong resistance by employees and their unions.
