something that directly or indirectly affects the nature of an outcome in a situation.
In business, both internal and external factors determine whether an establishment or company will succeed, fail, or make operational changes. These factors are determinants. From the time your business is an idea, determinants will drive the outcome of it.
A business plan is one of the earliest factors that will determine your level of business success. Another major factor is the quality of the services/products that you offer to your customers. The quality of your service is directly proportional to the amount of success you can gain in a business. Other determinants can be as trivial as your manager's commute time or as significant as interoffice promotions and bankruptcy.
Let’s say that you have just started a building materials company in an industrial city. This business, as do other businesses, has the ability to flourish or struggle to grow and eventually shut down depending on diverging factors. The biggest determinant you see is your location—but you see it positively. You're in the perfect place to start a building materials company, it is an industrial area, after all.
However, after a year, you find that business isn't what you expected it to be. The market is fine, but your business is not doing well. You consider the other determinants that could be affecting your business performance. The quality of your materials is standard, with a few top-shelf items. You've already assessed your workforce and customer service team—internal factors seem to be in check.
You're making all the right marketing decisions, too, so what's going on? It's the determinant that made you think you would succeed in the first place: location. This external factor is actually working against your business. There's too much competition in the area and your business is having trouble standing out. Before this determinant shuts you down, you decide to relocate your business to a city about 50 miles away. The commute may be longer, but you are now seeing the profit you should.
Significance of Determinant
Businesses may be able to identify risks and various determinants, but they are not always in control of them. There are some that they can control, like salaries, product choices, and policy and conduct. In this case, businesses can adjust the determinants of a situation to end up with a certain outcome.
However, some situations and determinants are out of our control. Businesses need to plan for these instances through employee benefits, insurance, and other policies. But even then, when illness strikes right before a big presentation or a power outage shuts down the office the day of an important deadline, there’s no real way to control it.
Determinants are the factors of life itself and a business needs the flexibility to roll with the punches. If not the flexibility, then the foresight to prepare for any type of emergency. Any determinant a business deals with should help push the situation towards a positive outcome.