The aim of the following paper is to make an in depth analysis of the factors, which are critical for a business organization. Therefore, contextual factors those are internal for an organization and its business management and contribute potential impact on the business operations and the decision making procedures would be identified and evaluated. In this context, it is essential to mention that business is an aspect that is integrated in a business environment in which both the internal tangible and intangible facets as well as factors interplay with the ever changing external business environment (Saroogh et al., 2015). Therefore, it is understandable that for a business organization, factors of both internal and external environment have vital priorities.
It has been identified that the fundamental contextual factors for a business organization are goals and strategy, both internal and external business environment, organizational size, technology and organizational culture (Pinder, 2014). Each of the aforementioned factors does have a potential impact on both profit and non-profit organizations. It is essential to mention that an organization whether profit oriented or non-profit penetrate into a market with some specific demand. In order to accomplish those demands, every organization needs to set an apt goal or organizational aim that is required to be attained with the help of a set of objectives. On the other hand, another contextual aspect, which is organizational strategy, is considered to be the crucial steps those are required in order to meet the organizational objectives. According to Pernot and Roodhooft (2014), an organization strives to achieve its desired outcome with the help of planned objectives. In this context, it is required to note that the senior managers of individual organizations articulate and establish convenient strategic objectives in accordance with the organization’s aim for the subordinate employees (Kulik & Li, 2015).
Nevertheless, in terms of contextual factors, it is worth considerable that an organization’s strategic goals are potential contributing factors though accomplishment of the goals cannot be pursued without convenient environmental factors. A business organization’s environmental factors can be classified into two main types – internal and external (Kuipers et al., 2014). The environmental factors play a significant role as contextual factors as they determine the success level of a particular business project. In terms of external business environment factors, there are clients or customers, competitors, scientific and technical committees, political, economic, social and cultural factors (Haslam et al., 2014). On the other hand, the internal environmental factors are considered to be suppliers, investors, employees and management. It is essential to denote here that in order to understand the credibility of both of the internal and external factors, which highly affect the business operations and the decision making factors of an organization, it is essential to evaluate the factors with the help of macro-environmental and micro-environmental analysis processes. Organizations generally pursue a PESTLE (Political, Environmental, Social, Technological, Legal and Environmental or ethical) analysis along with a SWOT (Strength, Weakness, Opportunities and Threats) for understanding and evaluating the condition and its probable impact on a particular business project (Donaldson et al., 2013). Besides, SWOT and PESTLE, there is the theoretical framework of Porter’s five forces (Ganter & Hecker, 2014). It has been identified that Porter’s five forces model is one of the most influential model that propels an apt strategic management to the core of management goals.
According to Porter’s five forces framework, an organization needs to evaluate the power of its potential target market, existing suppliers or raw material providers, existing rival organizations along with the new entrants. The framework is indicative of the fact that in term of significant contextual factors for an organization, the power of some of the external and internal environmental factors such as buyer, rival organizations and suppliers is most crucial (Csikszentmihalyi & Sawyer, 2014). It is further indicative of the fact that a successive or fruitful revenue growth of a business cannot be achieved without an in-depth analysis of the bargaining power of the suppliers, customers, rival threat of other organizations and power of the new entrants. In the words of Cameron and Green (2015), an in-depth evaluation of Porter’s five forces works as a risk assessment program as through the framework sincerely pinpoints the probable constraints or risks, which an organization could face.
Nevertheless, in this respect it should be considered that as one of the necessary contextual factors, an organization’s particular work culture holds significant contribution. An organization’s culture refers to a distinct system through which assumptions, value, beliefs and individual organizational strategic goals are shared. Organizational culture is a particular system that governs as well as controls the behaviors of the employees. It has been understood that the purpose of the organizational culture is to share the values so that the people working in the organization can have clear idea about the organization’s decorum, expected performance standard and expected behavior (Cameron & Green, 2015). Therefore, understandably it is one of the significant contextual factors that directly govern another essential contextual factor, which is one of the internal organization’s aspect – employees. In this context, it is required to mention that the expression of the dominant business culture is related with the core values whereas another significant part of culture that is subculture whose responsibility is to reflect common situations, predicaments and experiences. However, it is required to mention that subculture is relevant for those organizations, which have several geographical separations.
On the other hand, organizational size is another significant contextual factor that should be prioritized in the particular context. Fundamentally, organizational size is considered to be the physical capacity, personnel availability, organizational inputs and outputs and discretionary resources. Most significantly, organizational size highly affects the organizational structure and culture (Csikszentmihalyi & Sawyer, 2014). Apparently, organizational size is considered to be the human power or number of efficient employees of an organization. Therefore, it means that an organization’s employees work like an asset that play vital role as a part of internal environment as well as organizational size. Nevertheless, it is to signify in this regard that employees as organizational size matters highly only when an organization have a group of efficient professional managers. However, organizational size is a vital factor for determining whether an organization needs to have centralized structure or the decentralized one. Recently, it has been proven by several studies that more than 1000 of organizations have implied that they have realized statistically significant and positive relationship between their organizational size and formalization (Ganter & Hecker, 2014). Nonetheless, it is to consider here that the contextual facets of an organization highly affect the organizational decision making procedure as each of the factors necessarily contribute to the success factor of the organization. Therefore, understandably the decision making process needs to include assessment of the probable risks, which are related with the contextual factors.
Therefore, in this context, it is essential to discuss that if the contextual factors would not work as per the expectation or would cumulate negative impact then it is possible to encounter high level of risks. Risk in an organization can come from any field that is directly related with the internal facets of the organization. It has been identified that risk management is determined by risk assessment and there are two main ways through which an organization decides the applicable measures for mitigating the predicaments (Kulik & Li, 2015). The first one is the consequence based safety management that asserts that the worst conceivable situation at time of an installation should not affect areas, which are outside the distinct boundaries. Therefore, outside the certain boundaries the chances of risks can be minimized. On the other hand, another one that is the risk based safety management says that there is a need to assess probabilities related to every organizational contextual factor based on their individual predominant natures. It is significant to mention here that the process of risk management involves certain steps, which are identify the risks, identifying the causes, indentifying the controls, establishing the likelihood and consequences of the risks, establishing the risk ratings indicators, select the most suitable risk eliminating option and then implement the finally selected decision (PernotE., & Roodhooft, 2014). After making the final decision and implementing it, it is essential for a business organization to monitor the implemented system on daily basis and review as well as assess the consequences. According to Pinder (2014), the risk assessment and risk management system should be pursued in a cyclic process. It means that until and unless a risk or the probabilities regarding a risk eliminate entirely, the aforementioned procedure needs to be applied in a repetitive procedure.
Therefore, from the above discussion, it has been understood that for a business organization, some of the most vital contextual factors are internal and external environment, technology, organizational culture, organizational size and the strategies and goal of an organization. The above discourse has signified the fact that an organization needs to analyze the credibility of each of the above mentioned contextual factors with the help of PESTLE, SWOT and Porter’s five forces’ analysis. Each of these frameworks helps an organization in understanding the condition and potentiality of internal and external factors. However, the paper has also pointed out that it is essential to pursue risk assessment as well as risk management procedures because each of the contextual factors of an organization possesses risks or different predicaments according to their application.
Cameron, E., & Green, M. (2015). Making sense of change management: a complete guide to the models, tools and techniques of organizational change. Kogan Page Publishers.
Csikszentmihalyi, M., & Sawyer, K. (2014). Shifting the focus from individual to organizational creativity. In The Systems Model of Creativity (pp. 67-71). Springer Netherlands.
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