Internal factors are those issues that affect the business's performance either negatively or positively and originate from within the business. These factors may increase profitability or cause loss depending on how they are handled.
Internal factors are the opposite of external factors which are generally those issues that affect the business but are beyond the control of the management. Below are some details regarding various examples of internal factors:
- The business structure — if a business has a structure that stifles communication or creates too many levels of approving a given issue, it may end up being ineffective. A good structure on the other hand enhances efficiency.
- Business stability — a business that is able to provide exactly what it promises over a long period of time is likely to win a lot of customers. However, a business that faces challenges in keeping its promises may end up being unreliable as it will be viewed as unstable.
- Management — when a business is managed by highly qualified people, it is likely to remain profitable. However, constant mismanagement of the business will inevitably lead to poor performance.
- Incentives — while incentives are generally viewed as good for any business, the manner in which they are given determines a lot. If some employees view the incentives as being partial or aimed at a chosen few, this could easily lead to poor performance since a group of employees will be motivated while another group feels unappreciated.