Internal and External Factors
Business is an important driver of economic growth. It supplies the manufacturing industry with raw materials while simultaneously supplying the end-user with consumer goods. Additionally, the infrastructure that is built to facilitate the smooth operation of business organizations improves the standards of life of people. Essentially, business serves to improve the quality of life of people across the globe. Based on this importance, enormous effort has been expended to improve the efficiency and effectiveness of business operations. Nonetheless, some internal and external factors continue to affect business both positively and negatively. Therefore, this paper investigates the effects of internal and external factors such as globalization, technology, innovation, diversity, and ethics on the four key functions of business, which include operations, marketing, finance, and human resources.
Previous research has established that each of the four functions of business is affected to particular extents by internal and external factors (Long, 2009). This paper uses McDonald’s as the case example to facilitate the investigation of the effects of the above-listed internal and external factors on business functions. As already hinted in the introduction, business is of great importance to the livelihoods of many people across the globe. Some aspects of its importance manifest through its various functions. Therefore, it is important to delineate each of the outlined functions prior to investigating how they are affected by internal and external business factors.
The Institute of Company Secretaries of India (2012) defines a business function as a process that is routinely carried out by an organization to facilitate the achievement of its objectives. The four key functions of a typical organization are, as noted above include, operations management, sales and marketing, finance and accounting, and human resources. Operations management as a function of business is responsible for the development of goods and services that a particular business deals in (The Institute of Company Secretaries of India, 2012). This function is critical to the well-being of an organization because it combines the research carried out by the marketing department and budget constraints as stipulated by the finance department. These two elements are important because they ensure that a business is able to meet the needs of its customers within its financial capabilities. It is crucial for a business to serve the needs of its clients because this is the reason for its existence.
An important point to note is that despite the importance of operations management, it is affected by both internal and external factors. Recent developments such as the concept of globalization have been found to have a substantial effect on operations management. For example, the Institute of Company Secretaries of India (2012) notes that since globalization bring organizations to the global platform where operational environments vary, the operation function has to adjust to accommodate the changes. McDonald’s is a business organization that operates in numerous countries across the globe. As such, it has to adjust to the requirements of each location where its subsidiary operates. For example, the business environment in the U.S. is quite different from that of China, yet the organization operates in both locations. It, therefore, has to comply with operational requirements in China as well as the U.S.
Elsewhere, culture also affects the operation of a business. In the recent past, McDonald’s developed an advertisement featuring a Chinese man begging a McDonald’s attendant for more of the delicacies offered by this organization (Francisco, 2010). The advertisement elicited outrage from the Chinese people because in their culture, begging is perceived negatively (Francisco, 2010). McDonald’s was compelled to stop featuring the advertisement right away. In this example, McDonald’s was forced to stop featuring the advertisement because it is unethical to demean another group’s culture. The organization’s decision to stop featuring the advertisement due to its negative impact on the Chinese customers can also be considered a move towards embracing diversity. Apparently, these factors alter the way a business conducts its operations.
The case is not different with the sales and marketing function of business. Sales and marketing is affected by globalization in much the same way as operations management. The cultural and business environment dictates the approaches used to market a product or service (The Institute of Company Secretaries of India, 2012). For instance, in the advertisement by McDonald’s, the company adopted an open mind approach typical of the Western world. However, it turned out to be a bad approach in the Eastern context. As such, they had to change it. Other than being affected by globalization and culture, sales and marketing is also affected by technology and innovation. Today, one can order for products from McDonald’s, pay online, and have the products delivered to the house. This development is made possible by technology and innovation and has significantly increased the sales of McDonald’s (Francisco, 2010).
The finance and accounting function of business is also not exempt from the effects of internal and external factors. Culture in particular has a significant effect on the finances of an organization. For example, some cultures expect organizations to provide their employees with accommodation, vehicles, and insurance covers that cater for their wellbeing including funeral expenses. When an organization operates in such locations, it has to live up to those expectations. In so doing, their finances are affected negatively. West Africa is notorious for these kinds of expectations. Interestingly, McDonald’s does not have outlets in the region despite countries like Nigeria having a huge potential market. Technology and innovation also have a notable effect on the finance and accounting function of McDonald’s. Like many other organizations that have chosen to embrace technology, McDonald’s uses modern technology in its financial operations (Francisco, 2010). Its diverse network of outlets requires the latest technology to facilitate smooth management of its finances.
Finally, the human resource function of business is also affected by the internal and external factors that are under scrutiny in this paper. The globalization phenomenon has ensured that businesses increasingly operate globally. As a result, the workforce has to be diverse in order to cater for the needs of all clients satisfactorily. The U.S. is one of the most diverse countries across the globe. Being home to McDonald’s outlets, the organization strives to ensure that its workforce is all-inclusive. Apart from being affected by globalization and diversity, the human resource function is also affected by technology. Today, organizations select their workforce from a diverse talent pool because technological developments such as the internet.
A point worth noting is that each of these factors affects the functions of business to varying extents. Not all of them affect each of the functions equally. Some of them, as has been outlined, affect some business functions more. Nonetheless, all the factors, internal and external, combine to have an enormous effect on business organizations. As such, businesses have to remain vigilant to the fact that these factors affect business functions and strive to ensure that the only draw the positive effects.
Reference
Francisco, A. (2010). McDonald’s case study and analysis. Retrieved on 29th June 2014; from http://www.slideshare.net/iipmff2/mcdonald-casestudy-analysis
Long, Y. (2009). The impact of information technology on the HR function transformation (Master Thesis). University of Twente.
The Institute of Company Secretaries of India. (2012). Business environment and entrepreneurship. New Delhi: Institute of Company Secretaries of India.
