Article on External and Internal Issues

ISO 9001:2015, 4.1, Understanding the organization and its context, states that an organization must
determine the internal and external issues that are relevant to its purpose and strategic direction, and
that affect its ability to achieve the intended quality results.

It also requires the organization to monitor and review information about these external and internal
issues.

Note 1 in the standard says that issues can include positive and negative factors or conditions for
consideration.
 
Note 2 states that understanding the external context can be facilitated by considering issues arising from
legal, technological, competitive, market, cultural, social and economic environments, whether
international, national, regional or local.
 
Note 3 states that understanding the internal context can be facilitated by considering issues related to
values, culture, knowledge and performance of the organization.

The intent of clause 4.1 is to understand the external and internal issues that are relevant to the
organization’s purpose and strategic direction and that can affect, either positively or negatively, the
organization’s ability to achieve the intended results of its quality management system.

The organization should be aware that external and internal issues can change, and therefore, should be
monitored and reviewed. An organization might conduct reviews of its context at planned intervals and
through activities such as management review.

According to ISO/TS 9002:2016, information about external and internal issues can be found from many
sources, such as through internal documented information and meetings, in the national and
international press, websites, publications from national statistics offices and other government
departments, professional and technical publications, conferences and meetings with relevant agencies,
meetings with customers and relevant interested parties, and professional associations
.
Examples of external and internal issues relevant to the organization’s context can include, but are not
limited to:
a) external issues related to:
1) economic factors such as money exchange rates, economic situation, inflation forecast, credit
availability;
2) social factors such as local unemployment rates, safety perception, education levels, public holidays
and working days;
3) political factors such as political stability, public investments, local infrastructure, international trade
agreements;
4) technological factors such as new sector technology, materials and equipment, patent expirations,
professional code of ethics;
5) market factors such as competition, including the organization’s market share, similar products or
services, market leader trends, customer growth trends, market stability, supply chain relationships;
6) statutory and regulatory factors which affect the work environment (see ISO 9001:2015, 7.1.4) such as
trade union regulations and regulations related to an industry;

b) internal issues related to:

1) overall performance of the organization;
2) resource factors, such as infrastructure (see ISO 9001:2015, 7.1.3), environment for the operation of
the processes (see ISO 9001:2015, 7.1.4), organizational knowledge (see ISO 9001:2015, 7.1.6);
3) human aspects such as competence of persons, organizational behavior and culture, relationships with
unions;
4) operational factors such as process or production and service provision capabilities, performance of
the quality management system, monitoring customer satisfaction;
5) factors in the governance of the organization, such as rules and procedures for decision making or
organizational structure.
At the strategic level, tools such as Strengths, Weaknesses, Opportunities and Threats analysis (SWOT)
and Political, Economic, Social, Technological, Legal, Environmental analysis (PESTLE) can be used. A
simple approach can be useful for organizations dependent on the size and complexity of their
operations, such as, brainstorming and asking “what if” questions.

Examples of External Issues

According to ISO 9001:2015, 4.1, Note 2, external issues arise from legal, technological, competitive,
market, cultural, social, and economic environments (local, regional, national, or international). Examples
of external issues are:
 Supply chain disruption
 Loss of a key supplier
 Technology shifts
 Competitive pressures
  Money exchange rates
 Oil price changes
 Increased regulations
 Patent expirations
 Trade union regulations
 Ventures into new markets
 Changes in financial markets
 Tightening of lending from banks
 Funding for non-profits
 Scarcity of raw materials
 Natural disasters
 Major road construction in service area
 International trade agreements
 Political stability
PESTEL Model
The PESTEL model is used as a framework for reviewing the business operating environment of an
organization, including legal compliance obligations. It can also be used to identify categories for
determining external issues.
Political factors are basically how the government intervenes in the economy.
Economic factors include economic growth, interest rates, exchange rates, and the inflation rate. These
factors greatly affect how businesses operate and make decisions.
Social factors include cultural aspects, health consciousness, population growth rate, age distribution,
career attitudes, and emphasis on safety. High trends in social factors affect the demand for a company’s
products and how that company operates.
Technological factors include technological aspects like research and development, automation,
technology incentives, and the rate of technological change. These can determine barriers to entry and
minimum efficient production level, as well as, influence outsourcing decisions. Technological shifts affect
costs, quality, and innovation.
Environmental factors include ecological and environmental aspects such as weather, climate, and
climate change, which may especially affect industries such as tourism, farming, and insurance.
Furthermore, growing awareness of environmental impacts affects how companies operate and the
products they offer, both creating new markets and diminishing or destroying existing ones.
Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and
safety law. These factors can affect how a company operates, its costs, and the demand for its products.

Examples of Internal Issues

Examples of possible internal issues are:

 Organizational structure
 Expected retirement of key personnel
 Availability of reliable, qualified workforce
 Capacity for product production; service delivery
 Addition of a second shift for increased sales
  Aging machinery or obsolete equipment
 Aging workforce and new hires
 Formation of a labor union
 Relocation of the company
 Business performance
 Rules for decision making
 Lack of organization knowledge
 Cost of quality
 Poor customer satisfaction; complaints
 Inefficient, ineffective processes
 Resilience of infrastructure
 Extent of outsourcing
 Contractual arrangements with customers
 Relationship with investors
 Service level agreements with customers
 Expiration of government funding
 Work stoppage
 Computer hacking
 Environmental pollution
 Social media coverage
 Organizational culture and behavior
 Corporate governance
A structure for identifying the distinct types of internal issues is the McKinsey 7S Model:
1. Strategy – Purpose of the business and the way the organization seeks to enhance its competitive
advantage.
2. Structure – Division of activities; integration and coordination mechanisms.
3. Systems – Formal procedures for measurement, reward, and resource allocation.
4. Shared Values – Beliefs and principles which guide decisions and behavior of management and
employees.
5. Skills – Core competencies and distinctive capabilities.
6. Staff – Human resources, demographic, educational, and attitudinal characteristics.
7. Style – Typical behavior patterns of key groups, such as managers and other professionals.
The 7S model is based on the theory that, for an organization to perform well, these seven elements
need to be aligned and mutually reinforcing. The model can be used to understand how the
organizational elements are interrelated and ensure that the wider impact of changes made in one area is
taken into consideration.