Three Factors Influencing the Strategy of a Company

Knoji reviews products and up-and-coming brands we think you'll love. In certain cases, we may receive a commission from brands mentioned in our guides. Learn more.
The strategy of a company is generally determined by a combination of three factors. These are briefly discussed here.

A strategic company policy is the response of an organization to the demands that are set by its social environment. But which of these demands are relevant? In general, three types of ‘environmental factors’ can be discerned.

1. Economic Factors

Economic market factors are of great important for companies who’re actively seeking profit. Organizations do not operate solely on an economic market with specific characteristics, but also have to deal with a resource-, capital-, and labor market. Important qualities of the economic market are:

  • The number and quality of the competition: This determines how difficult it is to enter this specific market.
  • The stability or dynamics of the market: It is obvious that a more dynamic market puts a lot of strain on the adaption potential of the company and the employees.

2. Technological Factors

The discoveries made by science and technology, in general, will eventually find their way into the business world. This leads to a certain approach of possible problems: the production technology of the company. In this context, not only the hardware is considered ‘technology’, but also the routines, heuristics and procedures that are used.

The nature of this technology, in turn, has an influence on the measure in which production processes are capital- or labor intensive. This determines whether the work can be described as ‘routine’ or ‘professional’. Furthermore, the nature of the technology that is used also has an effect on staff management, for example by putting constraints on the wages of the employees.

The influence of technology, however, does not have to be direct, as different options are sure to arise and technologies can be implemented in a variety of ways.

3. Sociopolitical Factors

This is often referred to as the institutional regulation of the work relationships. The changing concepts of what labor really means have an influence here. What is and is not appropriate in a working relationship is constantly subject to discussion in society.

Changing ideas about responsibility and social security do not only get ‘translated’ into new rules and systems, but also find their way to other areas of the policy. Notions concerning entrepreneurship are also influenced by the developments in society. For example, in the egalitarian culture of the sixties, entrepreneurship was almost considered a ‘dirty’ word. In contrast, now it seems that every employee should posses an entrepreneurial spirit, which is translated to staff management by stimulating autonomy and rewarding achievement.