Competitors (Internal Constraints within the firm)

The following are constraints that originate from within the organization but which management must take care of.

i. Constraints imposed by organizational charters and guidelines

Many organizations such as government agencies, religious bodies and corporations have written documents which constitute corporate charters, by-laws, policies, rules, constitutions etc. These documents spell out what the organization can or cannot do and managers in these organizations are limited by what these documents say.

ii. Constraint imposed by organizational policies, procedures, rules and strategies

These predetermined plans place limits on what an organization can or cannot do e.g. policy specifying that all sales be to wholesalers tells managers that sales will not be made to ultimate consumers at all, or rules against members of the same family working in the same organization.

iii. Constraints imposed by limited money and personnel

No organization has unlimited capital. Because of insufficient funds, managers may be unable to hire the best qualified people, purchase the best equipment and land and so forth. Therefore the organization will be restricted in what actions it can take. Managers may also be limited by the personnel (employees) within the organization who may not have the necessary skills or knowledge to carry out planned activities. Employees may also resist changes that affect them in the organization.

iv. Constraints imposed by higher level management

Policies, procedures and rules such as noted above are developed by higher level management. In addition higher level managers develop the strategies that direct the actions of other members of the organizations. The actions of higher management can therefore limit the actions of the lower level management.

v. Constraints imposed by custom and culture.

Custom is defined as long established, continuous, reasonable and constant practices considered as unwritten law and resting for authority on long consent. Custom defines the unique ways of how things have always been done in the organization.

vi. Constraints imposed by stockholders and Boards of DirectorsShareholders have the opportunity to influence a company by exercising voting rights.
        
Note:

The five elements of the external environment (i.e economic socio-cultural, political, legal, international and technological) affect the organization indirectly. Managers should monitor the indirect action factors for early warning signs of change that might later affect the organization.

Managers can only adjust to the external environment through the planning process, or by changes in the formal organization structure i.e through flexibility which involves a conscious structuring of the organization so that it will best meet the demands of the environment at any given time.

The direct action factors of the environment consists of the organizations stakeholders i.e. the groups which have direct impact on the organization. These are either internal like employees, shareholders and the Board of Directors or external like customers, suppliers, competitors, labour unions, financial institutions, the media and competitors. Managers need to balance the interest of all those stakeholders for the good of the organization. This can be done through such actions as (advertising, lobbying and collective bargaining).