Internal and External Environmental Analysis for Entrepreneurial Success

Entrepreneurial success is mostly depending on correct and appropriate decisions on time. To be a successful entrepreneur one has to know the position where he stands as a decision-maker.

An entrepreneur may make defective or even wrong decisions but he can remedy those before any irreparable loss is caused to him. For that reason, every entrepreneur should know detail about internal and external environmental analysis.

It is possible only through constant self-analysis done consciously in a planned way regularly at the end of every week but better if possible after the day’s business is over.

An entrepreneur must continuously ask questions, which can be grouped into two areas: internal areas and external areas.

Internal and external environmental analysis


Showing the Areas of Constant Self-analysis by an Entrepreneur

An entrepreneur’s growth & continuity depends on his capacity to earn a reasonable rate of profit which is on the ability to maintain an optimum level of productivity.

Increased productivity is possible if due decisions involving the major interested parties are appropriate and taken on time.

You as an entrepreneur, after the business gets going, should piously keep a vigilant look on the matters connected and also on those through whom you operate the business. You and your personnel form a lean aiming at reaching the goal earlier.

This team must work sincerely and ask: are we doing tangs right? Are we doing the right things? But the main key is You – the entrepreneur. Ask yourself to analyze selected pertinent questions starting with you first. 

Internal environmental analysis

You as the entrepreneur

All the time you should learn and try to grow up as an entrepreneur if you want growth and prosper of your business.

As well as your personal growth will be reflected in the increasing productivity of your venture. Here we arrange some questions to test personal growth:

  • Do you have more knowledge about your business well now than you did a month ago?
  • Do you know the parties interested in your business? What for?
  • Are you able to see more relationships in knowledge than you did before? Are you developing wisdom by being able to correlate and apply different kinds of knowledge purposefully for achievement?
  • Are you more creative, more innovative than you were before, through combining what you know in newer, better, more effective ways?
  • Do you tolerate and deal with ambiguity and uncertainty more effectively than in the past?
  • Are you able to work cooperatively with others while preserving your unique qualities?
  • Are you showing real growth through the acquisition of increasingly higher levels of competence?
  • Do you know how much risk you can take & in what direction? 

Your Employees

Productivity increases with satisfying working conditions, as does morale. Your employees’ morale may be judged by their attitudes toward work and (their cooperation in trying to achieve the objective of your business; high morale is a key test of a well-managed organization.

You’ll have satisfied workers and the desirability of high morale if you possess and demonstrate the characteristics of the ideal entrepreneur.

As your business expands, you might ask yourself these kinds of questions about factors that influence the morale of your employees:

  • Do I let my employees know what’s expected of them?
  • Am I sensitive to their needs?
  • Am I open and honest in dealing with them?
  • Do I let them have some control and let them alone do it their way?
  • Are they paid adequately compared with other businesses?
  • Do they feel a sense of participation, and pride in the business, and believe they’re doing something worthwhile?
  • Do I encourage them to come forward with their ideas?
  • Do I communicate clearly with them and listen actively to what they have to say?

High morale doesn’t necessarily guarantee high productivity. Employee attitude towards the job and your business will also be affected by outside conditions beyond your control.

But high morale indicates a strong predisposition toward increased productivity and presents clear evidence of sound management of human resources.

External environmental analysis

Your business will have important relationships with the customers, suppliers, creditors, community, and government. Every type of eternal relationship affects the input and output sides of productivity.

Your Customers

Developing and maintaining a consumer orientation has been a persistent theme for entrepreneurial success.

Your business will thrive or fail depending on how consumers cast or withhold their money votes. Some questions to guide you in assessing the productivity of your marketing efforts are:

  • Am I maintaining or improving the quality of my products or services?
  • Is the right quantity of my products or services available at the right place, at the right time?
  • Is my promotion strategy reaching potential customers with an effective message and conveying the image I want for my business?
  • Am I maintaining expertise and improving the technical knowledge of my product or service?
  • Am I constantly gathering new information about the market my business serves? Am I alert for changes in consumers’ needs?

This question and others like them will have to be raised to guide your business towards its ultimate goal-consumer satisfaction that produces profit. Remember, the consumer is now your boss in the market you serve.

Your Suppliers

Suppliers are a major input, but they can also affect the output side of productivity. The businesses that supply your firm with operating materials, equipment, or inventory can become an extension of your business.

They’ll be able to give you advice on technical matters and keep you informed of what other companies in your industry are doing. Some questions to test your responsiveness with the suppliers follow:

  • Am I prompt in paying my accounts to the suppliers?
  • Am I fair in negotiating transactions with the suppliers?
  • Do I display and promote the suppliers’ inventory as I assured them I would?
  • Do I allow enough lead time for the supplier with my reorders?
  • Do I thoroughly and fairly analyze cost and service before switching to a new supplier? 

Your Creditors

Commercial banks or other institutions will be tending your working capital as inputs to enable you to purchase tangible resources.

Having financial dealings with other small businesses, the banker will know first-hand some of the pitfalls to avoid. Some questions to help you assess your relations with creditors are:

  • Am I meeting my loan repayment commitments on time?
  • Have I let my banker know enough about my business and my problems to be able to help me?
  • Am I planning far enough ahead to get working capital when I need it?

Am I keeping my banker informed of the progress of my venture?

Your Community

Your business must pay its civic rent. From informal relationships with community business leaders, you’ll learn about changes in the local market, new business techniques, new sources of supplies, or business services.

You may even pick up hints for new products or services your fanciness might offer or economical ways you haven’t tried before to reach potential customers. The questions here are straightforward:

  • Am I an active member of appropriate civic organizations?
  • Have I contributed to or has my business sponsored any local drive, charities, or fund-raising activities?
  • Have I assumed or can I attain leadership if? any local clubs, committees, or civic groups?

You should know that a reasonable proportion of your annual profit for social work will prove to be an investment raising goodwill and ultimately resulting in increased sales.

Your- Government

Your relations with the national, provincial/ state, and Social governments affect productivity too-both positively and negatively. You should take full advantage of these services since you’ll be helping to pay for them with the taxes your business pays. Ask yourself:

Am I aware of all the financial and non-financial assistance that is allowed by the government?

  • Do I fill out business forms properly and am I paying taxes on time to avoid reprimands censures or penalties?
  • Am I exploiting the governmental resources available, both financial and human, to help make my business successful?

To be successful in his endeavor, an entrepreneur must proceed in such a way so that all connected with his business remain satisfied and look at his business with a positive attitude.

We can conclude by saying: Make the interest parties satisfied to continue as a successful entrepreneur.

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