Important Business Environment Factors and Their Impact

There’s no doubt that one of the main objectives of any entrepreneur is to have their enterprise grow profitably. To achieve this, it is very important to understand the factors that contribute to growth.

There is widespread agreement that business growth is a complex process that is neither linearly continuous nor dependent on a small number of variables.

While there are many factors that might influence a company’s growth potential, we’ve found that there are a few that business leaders should pay special attention to, such as the availability of financial, human, and social resources.

Technical and management abilities that can adapt to and cope with a changing environment, as well as the ability to train and develop employees, are also essential. And without a dash of imagination and the ability to recognise opportunities, no business can thrive.

There are four major aspects that determine the growth of a company.

Here are the four important areas that any business owner should focus on while wanting to expand their company, according to Cranfield.

The main factors responsible for determining the size of the firm are as follows:

The size of an average firm varies from country to country. On the one hand, we have giant concerns in the United States and Germany and tiny businesses in small Indian towns. Why is that so? There are a number of factors that determine the size of a business unit in a country.

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The following are the main factors responsible:

1. Entrepreneurial Skill:

An entrepreneur’s ability, initiative, and resourcefulness are the most crucial factors in success. Everything hinges on his ability and judgement. An exceptional entrepreneur will be able to raise as much capital as he requires, hires the necessary labour force, and grow a large company.

However, a somewhat skilled entrepreneur will operate at a modest size, while a man with limited entrepreneurial aptitude will be pleased with a little business.

2. Managerial Ability:

For running the routine part of the business, managers are appointed. If a firm is lucky enough to have a manager of great ability, the size of the firm will grow to considerable dimensions. On the other hand, a mediocre manager will have a small-sized firm to manage.

3. Availability of Finance:

It is finance that oils the wheels of the business machines. If ample funds are available, it will help the entrepreneur to make his business grow to a big size.

This requires a proper development, of the banking system so that savings of the community can be effectively mobilized and utilized in the development of trade and industry.

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4. Availability of Labour:

Another factor on which the size of the firm depends is the availability of labour of requisite skill. After all, what can the entrepreneur even with large capital do, if the labour to man the business is not available? What is required is efficient and skilled labour.

5. Nature of Business:

Much also depends on the nature of business. If the business obeys the law of increasing returns, it will grow to a large size; otherwise, in the case of diminishing returns, it will remain stunted, and in the case of constant returns, it will remain stagnant.

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6. Extent of the Market:

The size of the company is also determined by the size of the market. If the commodity in which the company trades or manufactures has a vast market, the company will inevitably expand.

However, if demand for the commodity is volatile or limited, the firm’s size will remain tiny. These are some of the elements that influence the average size of a company in a country.

7. Behavioural and personal traits

Business leaders’ characteristics, such as behaviour, personality, and attitude, can all have an impact on the company’s growth. Furthermore, their skills, such as education and training, raise expectations in particular industries, while their social capital influences resource access.

Management experience, family background, functional skills, and knowledge of the relevant business area are all factors that will affect the success formula.

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8. Business structure and management 

The business structure, its goals, and the performance of its management team, in particular their ability to make rational decisions about its operation, will highly impact the successful development of the business. 

9. External factors

While the above two factors can be regulated to some extent, external circumstances over which we have little control will have an impact on the company’s growth.

The cultural, political, and economic conditions of the country or region in which the corporation operates are examples of such influences.

Individual characteristics to complicated interrelationships among frequently changing cultural, political, and economic factors at national, regional, and local levels are all triggers for firm growth.

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10. Location

Growth opportunities are likely to be influenced by variations in the size, scope, and buoyancy of demand in local markets. Variations in the cost and availability of labour, premises, and services have an impact on the supply side.

Owner-managed enterprises, on the other hand, are typically adaptive, utilising various techniques to deal with these local variations in order to minimise their influence. Just because you have a growth mindset doesn’t mean you’ll grow.

A company founded to take advantage of a market opportunity would be expected to have a stronger growth orientation than one founded due to “push” considerations such as a lack of alternatives. In a nutshell, it’s critical to discover the most significant business elements and then use them to expand and grow the company.

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