Elements of the internal environment of the organization and their characteristics

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

An integral part of conducting a SWOT analysis is to identify market opportunities and threats, as well as to determine the strengths and weaknesses of the company, for which various elements of the internal environment of the organization are analyzed.

What is the internal environment of an organization?

When it comes to the internal environment of an organization, it usually means a set of elements that can be influenced in one way or another, in comparison with environmental factors that cannot be changed. So, the internal environment of the organization includes:

1. People.
2. Goals.
3. Tasks.
4. Technology.
5. Structure.

The combination of all these elements is the essence of the organization: people, united in a certain structure, perform a series of tasks, using certain technologies to achieve ultimate goals.

Thus, combining elements of the organization's internal environment may or may not be effective. The task of analysis is to identify those processes that are ideally set up, as well as those thatreduce the overall profitability of the company.

How are elements of the internal environment classified?

The main elements of the organization's internal environment are usually classified into groups, or so-called slices:

• organizational slice;
• marketing cut;
• frame cut;
• production slice;
• financial slice.

For the convenience of analysis, the elements of each group are considered separately. In the organizational context, they study the features of the enterprise from the point of view of the organizational structure of the company. Attention is paid to both hierarchical relationships within the company and the system of interaction between individual structures of the enterprise. The marketing slice gives an idea of the range of products, their features and benefits, pricing factors, as well as sales and advertising methods.

When considering the financial cut, attention is paid to financial statements, the dynamics of the main indicators of costs and profitability. The efficiency of cash flow is determined. In the personnel section, the relationship between the management and executive personnel is considered, and the analysis of the results of labor activity is carried out. This also includes the corporate or organizational culture of the organization, methods of stimulating and motivating staff.

The fifth section - production - includes a list of technologies, norms, rules and standards for the production of goods and their quality control. A variety of innovative developments and scientific research aimed at expanding the range or improving the useful properties of the product, alsorefer to the production cut.

Personnel as an element of the internal environment

The task of the situational approach in the analysis and management decision-making is to consider the behavior of individual employees, their groups, as well as the nature of the influence of management personnel. According to economic theory, personnel is one of the main factors of production, however, in modern realities, the team of employees becomes a strategically important element.

The managerial task is to organize the work of personnel as efficiently as possible, while several components of this process should be taken into account:

• principles of recruitment and recruitment;
• adaptation of new employees;
• personnel monitoring, its methods;
• motivation and stimulation of staff;
• training, staff development;
• creating and maintaining corporate culture.

Thus, the system of organizational culture of the organization, improperly adjusted at the enterprise, can become its weak side and, as a result, make it difficult to achieve both short-term and long-term goals and intermediate tasks. Team management remains one of the strategic activities of leaders.

Company goals as an element of the internal environment

When analyzing the state of the company and planning a further strategy, one or more goals are set. The task of the company's management is to choose only achievable goals that correspond to the state of the market andcompany.

Having sufficient financial resources, staffing and effective planning combine to lead to the right goal setting. At the same time, the list of general goals should be divided into subgoals or tasks, the responsibility for the implementation of which is distributed among employees or departments of the organization.

For example, company X, entering the market with mass-produced products, sets a goal: to become a leader in a certain market in the short term. At the same time, Company X operated in a different segment, and when analyzing the financial statements, it was found that there is an outstanding loan from the bank for a large amount. In addition, the analysis of personnel policy showed that the sales department performs its functions inefficiently and planned indicators are not achieved. It is obvious that the goal set by the management is not only difficult to achieve, but almost impossible.

Examples of correctly formulated goals:

• reach up to 60% brand awareness;
• increase market share to 16%;
• to enter the top three companies in the market;
• increase the average bill to 1500 rubles;
• increase site traffic up to 2000 people per day.

Thus, in order to effectively set goals, company management must be based on in-depth market research and the company's current position in it.

Company's tasks as an element of the internal environment

After compiling a list of company goals, it is necessary to divide them into tasks, that is, into components. Rare in any organizationonly one target is set. So, the strategic goals of the company are converted into operational goals for the year, half year or quarter. Further, the goal is divided into a list of specific tasks that must be completed in order to achieve the desired result.

Each of the established tasks must have a documented end result, as well as departments and specific employees responsible for its implementation. Here is an example of converting one of the goals into a list of tasks. So, to achieve the goal of increasing sales by 25%, the company can distribute tasks in this way:

1. Increase the appointment schedule for each sales manager by 5%. Responsibility and control lies with the head of the department Ivanov I. I.
2. Preliminary analysis of the market situation from the marketing department, development of an advertising company with monthly monitoring of the implementation of recommendations. Responsible - Head of Department A. P. Petrov.
3. Expansion of the sales team to 20 people by the end of the year. Responsible - HR-manager A. I. Sidorov.
4. Opening 5 new branches in the regions in 6 months. Responsible - Deputy Director for Development G. I. Laptev, HR Manager A. I. Sidorov.

Thus, the head of the organization can control the process of achieving the goal of the enterprise in stages, and the correct work of personnel managers will allow each employee to be personally responsible for achieving the overall result.

Technologies and their place in the internal environment

Processthe transformation of raw materials into finished products requires certain technologies. If it is a canning factory, then special lines, trained personnel, approved standards and registered patents are needed. All of the above apply to enterprise technology.

No matter how surprising it may be, technology, as an element of the internal environment, is present even in small entrepreneurs or freelancers. For example, a photographer or designer uses special software, equipment and technology in their work, without which it is simply impossible to remain competitive in the market.

The structure of an enterprise as an element of its internal environment

One of the first steps in the analysis of the internal environment of the enterprise is a detailed examination of the organizational structure. At the same time, marketers and managers establish not only a list of internal departments, but also the relationship between them, hierarchical subordination and dependence.

Hierarchy in the organization of work of personnel helps to distribute work effectively. Employees are separated and separated into separate groups and departments, they are assigned to various departments. The hierarchy in the enterprise can be horizontal and vertical, and the efficiency and quality of the distribution of labor is revealed in the analysis.

One of the important components of such an analysis may be to determine the effectiveness of information and other flows between organizational units. For example, in enterprise B, which manufactures parts forvehicles, delays in the implementation of the plan are constantly recorded. Employees were asked to fill out work time cards, pen alties were introduced, but such preliminary team management measures were not effective.

When analyzing the relationship between the departments of company B, it turned out that the fault lies not with the employees who make the parts, but with the department that is responsible for repairing the equipment. So, many machines were idle more than the scheduled time due to protracted repairs.

How do you determine the strengths and weaknesses of an enterprise?

The adoption of a managerial decision is preceded by a thorough analysis of all elements of the internal environment, the external environment, followed by a conclusion about the place of the enterprise in the market and its capabilities.

The data obtained during the analysis must be presented in the form of a list. For example, these could be the following items:

1. Unqualified sales staff.
2. Lack of own accumulated funds.
3. Innovative developments in the production of goods.
4. Having a bank loan.
5. Wide range of products.
6. Obsolete production equipment.

After preparing such a list, it is necessary to separate the data by qualitative impact, that is, to determine whether this or that factor has a positive effect on the company's activities or a negative one.

So, as a result, the initial list should be divided into two parts, and the next step should be an assessment of the possible influence of these factors of the internal environmentorganizations. We recommend using a scale from 1 to 5 or from 1 to 10. Each item on the list must be evaluated in points, depending on how much this factor affects the company's activities.

The next step is to assess the possible harm that each of the items on the list can cause. As a result, the resulting list must be ranked according to two indicators - possibilities and probabilities. This method will help to cut off insignificant data and create a list of the main problems that were found in the analysis of the factors of the internal environment of the organization. An example of a qualitative analysis of the organization's environment should end with a specific list of no more than 10 items for each of the categories - weaknesses and strengths of the company.

What is the relationship between the internal environment and SWOT analysis?

The SWOT tool involves the analysis of the company's environment, both internal and external. The elements of the internal environment of the organization and their characteristics show what strengths can be used to achieve competitive advantages. The list of weaknesses obtained during the analysis will help to adjust the company's activities in order to minimize their harm or to modernize and improve.

The result of a SWOT analysis helps to compare the threats and opportunities of the external environment, that is, the market in which the company operates or intends to operate, with the factors of the internal environment. The task of a marketer, manager or leader is to draw up a marketing plan in such a way that, using strengthscompanies could have avoided harm from market threats. The same can be said about combining market opportunities and strengths of the company - the leader must decide how best to use them together.

How to do a SWOT analysis?

In order to understand how to properly conduct a SWOT analysis, consider the most common mistakes managers make when conducting it.

Unreasonable inclusion of elements of the internal environment in the category of strengths or weaknesses of the company leads to errors in planning. Each fact must be supported by specific figures and reporting data. It can be unfoundedly stated that the company is a market leader, but in fact this is confirmed only by the words of the head, and not by marketing research.

At the same time, in addition to reliability, each of the alleged strengths must be compared with known data about competitors. This will reveal the real strengths of the enterprise, which will help in achieving its goals.

For example, the strength of the company was the close location of raw material resources. Obviously, this provides many advantages for the company, helping to save both financial costs and time. However, when analyzing this information in terms of differences from competitors, it may turn out that all major players are located close to the sources of raw materials. It turns out that every company on the market has such a strong point, and therefore it will not be possible to get benefits compared to competitors.

For convenience and to prevent errors, you should analyze competitors from available open sources and determine their strengths and weaknesses. Next, it is worth compiling a test table in which each element of the internal environment is compared with competitors. As a result, it turns out that the company boasts not so many advantages.

All recommendations for determining the strengths and weaknesses of the company can also be attributed to the process of analyzing opportunities and threats in the market. All information must be true and accurate.

It is a common mistake to indicate general information that indirectly affects the company's activities. Or their influence is too small to be proven. For example, inexperienced managers indicate such environmental factors:

• crisis in the country;
• difficult situation in the economy;
• unstable exchange rates.

If we talk about crises in the economy, it is impossible to measure and plan their significance for the activities of a particular company. The “crisis” factor is rather vague, so it should be decomposed into specific components that really affect the position of the enterprise. It is possible that compulsory licensing was introduced at the state level, or quotas were set for certain types of activities.

As for the unstable exchange rate, it is often mentioned in their SWOT-analyses by those companies that do not have currency dependencies. If the company does not import or export, does not purchase raw materials from abroad,does not sell finished products in other countries, then the impact of fluctuations in exchange rates has an insignificant impact on the activities of the enterprise.

In closing

The company's internal environment is an important strategic resource that can help or, conversely, harm the company's activities. The internal environment of the organization includes several basic elements: people, technology, structure, tasks and goals. Such a set of elements is not accidental, since any organization with a certain structure employs people who, with the help of technology, achieve the goals and overall goals of the enterprise.

The head of the organization in making managerial decisions should be based on an analysis of the internal and external environment of the enterprise. If there is an obvious threat in the market, then the resources of the internal environment will help to overcome it. The same applies to market opportunities, which can be maximized only by using the internal resources of the enterprise.

Resources of the internal environment in the analysis are evaluated in terms of their impact and divided into strengths and weaknesses of the company. The organizational structure of an organization can be the weak side of the organization, while at the same time, a professional and efficient marketing department can be attributed to the strength of the enterprise.

When drawing up a marketing plan, several general goals are distributed in the form of tasks among departments, divisions, groups and specific employees. The right systemmotivation and stimulation of personnel, team management will help to give each task personal responsibility of the employee. At the same time, each employee in the team will understand that they are working to achieve one common goal.