Entrepreneurship Environment Comprises the Internal and the External Environment

The Internal and the External Environment Entrepreneurs do not start their ventures in a vacuum, but within an environmental context. Successful entrepreneurship requires dealing with both the internal (immediate impact) and external (indirect impact) environments. The environment determines what challenges and enabling factors entrepreneurs and organizations meet. Entrepreneurs should analyze the environment by carrying out The SWOT Analysis This is mainly to identify Strengths; Weaknesses, Opportunities and Threats related to their ventures/organizations .

The Internal Environment It relates to variables within the organization. These are variables, which the entrepreneur/ manager has control over. They should be analyzed in relation to: STRENGTHS Are attributes or characteristics of the organization, which enable it to exploit opportunities, deal with threats and to survive and grow. Examples of strengthens are a good financial base, an appropriate organizational structure, a motivated and committed manpower,

Examples of strengthens cont’… adequate capacity, quality service and products, a positive organizational culture, competent management, appropriate supervisory style, appropriate technology, customer loyalty, large market share, backing of a strong stakeholder, etc

The Internal Environment WEAKNESSES: Are attributes of the organization which work against its ability to exploit opportunities, deal with threats and to survive and grow. EXAMPLES OF WEAKNESSES ARE: inadequate capacity, poor financial base, poor customer service,

Examples of weaknesses cont’… poor quality products, demotivated employees, high staff turnover, inappropriate structure, inappropriate management style, antiquated equipment and machinery.

Examples of weaknesses cont’… Lack of skills, poor labour relations, limited client base, negative organizational culture, lack of creativity and innovation/ Poor R & D narrow product base etc.

Variables under internal analysis and some main elements involved. OBJECTIVES Analyze clarity, suitability, and achievability of plans including the vision and mission ORGNISATIONAL STRUCTURE Analyzed in relation to appropriateness, coordination potential, clarity of roles and responsibilities, flow of information, and compatibility with the culture and management style of the venture FINANCIAL RESOURCES Analyzed profitability, liquidity, gearing, adequacy of funds

Variables under internal analysis cont’… MARKETING Analyzed in relation to market share, positioning, customer service, market coverage, effectiveness of promotional effort, channel relations, product portfolio PRODUCTION Analyzed for capacity, efficiency, location of plant, cost structure, quality control

Variables under internal analysis cont’… RESEARCH AND DEVELOPMENT Analyzed in relation to the rate of new product development, design of products, market orientation, technological competence, success rate of products HUMAN RESOURCES Analyzed in relation to skill and competence, motivation, commitment, labour turnover, labour relations, values, attitudes

Variables under internal analysis cont’… SYSTEMS & PROCEDURES Analyzed in relation to whether they exist and their effectiveness A set of detailed methods, procedures and routines created to carry out a specific activity, perform a duty, or solve a problem. CULTURE Analyzed in relation to whether it is positive or not

Culture Norms or Standard: Team work, regular decision meetings, work late to finish a job etc Main values: Quality, excellence, speed of delivery, empathy, responsiveness etc Philosophy: Environmental friendly, ‘customer is always right”/ ‘customer is king’, wide range of products/services etc Rules: Never leave cash office unattended, tea breaks i.e. 10am and 3pm Climate: Friendly or distant, relaxed or stressful, creative or oppressive

EXAMPLES OF BUSINESS SYSTEMS Lead Generation Customer Service Hiring Inventory Management Training Shipping Pricing AccountingInformation

The External Environment It relates to variables which are outside the organization. The entrepreneur has little or no control at all over these variables. OPPORTUNITIES: Are developments/ events outside the venture which can be exploited to the advantage of the venture itself thereby affording survival and growth.

Examples of opportunities are: An increase in demand, favourable laws and regulations, new technology, problems for a competitor(s), companies seeking partnership fall in interest rates

The External Environment cont’… THREATS: Are external developments/ events, which can work against the enterprise and prevent it from achieving its objectives thereby putting survival and growth at risk. EXAMPLES ARE: decrease in demand, unfavourable laws and regulations, political instability,

EXAMPLES ARE cont’… hostile government attitudes toward business, punitive or high tariffs, increase in taxation, high interest rates, unfavourable movements in exchange rates, problems for a major supplier, a change in customer needs, unfavourable weather conditions moves made by competitors.

VARIABLES OF THE EXTERNAL ENVIRONMENT ECONOMIC FORCES Growth in GDP/GNP Levels of competition Levels of demand Interest rate

ECONOMIC FORCES Inflation rate Balance of payment Exchange rate Levels of employment

VARIABLES OF THE EXTERNAL ENVIRONMENT cont’… POLITICAL FORCES Attitude of government towards business Political stability/ instability

VARIABLES OF THE EXTERNAL ENVIRONMENT cont’… LEGAL FORCES Laws, regulations and by-laws Regional development  SOCIO-CULTUAL FORCES Consumption and buying patterns Demographic forces

VARIABLES OF THE EXTERNAL ENVIRONMENT cont’… GLOBAL FORCES Requires looking at all variables above within the global text because what happens in one part of the globe affects other parts