An internal factor is something the business can change directly. An external factor is something outside the business that it can only respond to. The control test sorts any fact in a case into one of the two.
This lesson opens the business environment cluster. Next comes explaining technology and market changes.
What is the control test?
Take a fact from the case and ask one question: “Can the owner change this directly?” If yes, it is internal. If no, it is external.
The test works because the two lists are really about control, not about topics. The same topic, such as money, can appear in both lists.
Worked example: an invented bakery
Kedai Roti Mawar is a small bakery in a fictional town. Here are seven facts from its case. Apply the test to each.
| Fact | Can the owner change it directly? | Label |
|---|---|---|
| The two bakers have five years of experience | Yes, through hiring and training | Internal |
| The oven is old and slow | Yes, by repairing or replacing it | Internal |
| Flour prices have risen by RM1 a bag | No, the supplier sets the price | External |
| A new bakery opened across the road | No | External |
| Customers now prefer wholemeal bread | No, but the bakery can respond | External |
| The owner has RM5 000 in savings for the business | Yes, she decides how to use it | Internal |
| A new rule requires staff to wear hairnets | No, it applies from outside | External |
Notice the money rows. Flour price is external money, while the owner’s savings are internal money.
The mistake of labelling by topic
The common slip is to label by topic: “money is internal”, “customers are external”. This breaks on cases, because the topic does not decide the label.
Compare two answers to the question “Classify the rise in flour prices”. The generic answer says: “It is a finance factor.” The applied answer says: “It is external, because the supplier, not Kedai Roti Mawar, sets the price, and it raises the bakery’s costs.”
Check yourself
In the bakery case, classify each and give the reason in one phrase: (a) the owner decides to stay open one hour later, (b) a bus route to the town centre is cancelled, (c) the bakers lack training in making sourdough.
Answer
(a) Internal: the owner decides opening hours directly. (b) External: the bakery has no control over bus routes, although it may lose customers. (c) Internal: the owner can arrange training.
If you labelled (b) internal because it “affects the shop”, revisit the test: affecting the business is not the same as being controlled by it.
What to study next
After classifying, the next step is to say how an outside change works through to the business. Continue with explaining technology and market changes, and then combine both skills in applying a simple environment analysis to a case.
The business case answer planner sets out the steps for a case question. For a teacher to give you fresh cases, see online one-to-one Business tuition.