The global recession forced thousands of firms into bankruptcy. Does this fact alone confirm that “external factors are more important than internal factors” in strategic planning?

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We cannot consider external factors without internal factors or vice versa. External factors set the stage for what a company must deal with, but internal factors largely determine the extent to which a company is able to perform well in a given circumstance. While external factors may set a company in a bad position, astute strategic planning can allow a company to adapt to changing market circumstances and continue to thrive.

Internal factors largely shape what options a company has in adapting. Thus internal and external factors go hand-in-hand, and it doesn't make sense to talk about one or the other as more important. From developing new products, improving quality of goods or services, or shifting the kinds of products produced or how they're distributed, attentiveness to internal factors lets you know what you have to work with in strategic planning while external factors can suggest which of your possible paths is most likely to be successful.

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Not necessarily. It depends on the company, its industry, and the quality of its management, as well as the particular internal and external factors that affect a business. External factors are as important as internal factors in strategic planning.  I believe that one does not supersede the other.

First of all, astute company management is management that considers all factors carefully when coming up with a strategic plan. Good managers don’t just consider external factors when coming up with a strategy.

Yes, external factors are very important for a company to consider. For example, retail clothing firms are finding it quite tough to grow sales in the contemporary marketplace. The reason: today’s consumers are currently spending more money on “life experiences” (food and travel) than on products such as clothing.

This past Christmas season was, over all, a dismal one for retail sales in the U.S. Therefore, the external factors of “changing consumer thinking and preferences” are causing retailers to think differently about how to get people back into their stores.

However, a company cannot ignore internal factors in strategic planning as they are just as important. A clothing retailer may have a concept for a new product by a great in-house designer. The company may believe this new product offering can once again spur consumer interest – resulting in more consumers visiting the retailer (in store and online) and also resulting in more sales. As a result, the retailer must advance this program, this internal factor, in its effort to drive sales and profits.

The strategic plan would be to get this new and innovative clothing product to market. The retailer would take into account external forces, while internally continuing to engage in product development. Therefore, strategic planning involves taking into account, as a whole, external and internal factors.

Furthermore, strategic planning means considering the internal factor of “budget constraints.” A company has only so much money to allocate to its strategies and must take this internal factor into account, while at the same time considering external factors such as economic volatility, unemployment, high interest rates, and government regulations as pertains to their specific business.

Many firms were forced into bankruptcy during the global recession because they were not well-prepared to weather that economic storm. This was due to internal factors such as poor planning; inefficient operations; limited budgets; employees that may not have been properly trained; a wrong product mix; unsuitable pricing, and more. Then, harsh external factors combined with these and caused their downfall. Nonetheless, more efficient and well-prepared companies, with smart management, survived the global recession and are still thriving today.

 

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