Firms at one point have to act and react to happenings outside its operations. These forces happening outside the firm’s operations are the external forces. These forces could have negative or positive impacts to the firm in question. The impacts posed by these forces could be felt immediately, in the near future, between 1 and 7 years, or in the long-term, usually a period exceeding 7 years. It is for this reason that a firm should study these outside forces and devise a way of dealing with the factors influencing it negatively. The forces influencing firms positively are the backbone to its success and also be studied and improved on to ensure the firms operations thrive better. Such underpinning tenets thus justify the need for the examination of the factors contributing to success of business by developing an argument that clearly explains them and their impacts.
A firm is a business entity either as a corporate, partnership or as a sole proprietorship (Richard). Although this in ordinary circumstances is thought to describe a company, it also includes industry setting. An industry involves economic activities whose concern is to process raw materials and produce goods. Industries consist of three sectors, which are the primary, manufacturing or the tertiary. The primary industries concern is extraction of raw materials and resources. Good examples of such industries are mining and farming. The secondary industries are usually concerned with processing of products. Industries of this type encompass all factories involved in production of furniture, refining of metals or production of agricultural products. The tertiary industries on the other hand are industries involved in provision of services with good examples being doctors, and managers. From this explanation, one can deduce that industries can have their customers as the final consumer or as other industries so that they can carry on with production of final goods. Industries can be further categorized depending on raw materials at its disposal, its size and ownership.
A company is an “artificial being” created under law and possesses a discrete legal entity (John). This is an entity involving itself in business. Ownership of a company could be by an individual or by a certain number of individuals who share a common goal. This forms a major basis under which companies are classified. Basing on the number of people coming together to form a company, companies can be classified as sole proprietorships, partnerships or corporations. In a sole proprietorship, an individual person owns and runs a company. In a partnership, the company is a formed and run by two to fifty individuals. These individuals come together with the aim of starting a business with an agreement of cooperation for advancement of their mutual interests. These individuals are liable for the operations and obligations of the company. The other form of company is the corporations. These are large business entities with over fifty individuals as the members. These corporate have legal entity separate from that of the members. These companies are further categorized into limited liability company, company limited by shares and by guarantee or unlimited company.
There are various internal and external factors influencing a business. Many businesses dwell much on the internal factors and forget about the external ones, which has been a major contributing factor in the failure of many businesses. These factors include power of suppliers, barriers to market entry, competition, technology, and political and legal setting (Charles). The effects of these factors can be felt immediately the business has been set up while the effect of the others could be felt in the short run or long run. Factors such as barriers to market entry have an immediate effect on firms. With challenges in entering the market, a business is likely to have challenges from the start of its operations. Other factors such as competition and power of suppliers are likely to have effect in the short run usually in a period between 1 and 7 years. For instance, the effect of competition can take at least a year for a business to feel its effect. This applies to the power of supply. Other factors such as changes in the political and legal setting can be felt after a long period many a times exceeding 7 years. The political and legal setting usually takes a long span of time to change and their effect to the business is also felt after a long time.