External factors are influences outside of a company that can impact a business. Most dominantly, this includes the economic and political environment of a country, competitors, technological changes, and customers. There can be slight variations of this as indicated in the Environmental Factors diagram. Factors outside of a company that affect its ability to operate are considered part of the external environment. Some external elements can be manipulated by marketing while others require the company to make adjustments. Many times, these external factors are difficult to control or even predict, and can be downright confusing. Managers should oversee the basic components of their company’s external environment, continually keeping close watch for any significant changes.
Internal factors are the strengths and weakness of a company that can affect how the company meets its main goals and objectives. Factors such as leadership styles, the company’s mission statement, and its organizational culture are frequently considered to be internal. Employee behavior is defined by the company’s internal environment. This internal environment is made up of the variables within the company that include the current employees, management, and the corporate culture. Companies need to have the proper people in place in order to motivate their team of employees and to have knowledge of the different factors that can affect a company’s earning potential.