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44 Examples of Business Constraints

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Business constraints are the forces that every organization must contend with in order to execute its strategy. Each organization has its own unique set of constraints that collectively influence its competitive position in its industry. The following are a few basic constraints that businesses typically face.
Capital
Budget / funding
Cash flow
Time
Deadlines
Labor markets
Employee skills
Capabilities
Facilities
Regulations
Locations
Knowledge
Expertise
Relationships
Resources
Legacy technologies
Technology platforms
Systems
Processes
Economic conditions
Intellectual property
Office politics
Organizational culture
Scalability
Capacity
Competition
Logistics
Supply
Communication barriers
Organizational structure
Stakeholders
Administrative processes
Decision making processes
Approvals processes
Internal controls
Required permits & licenses
Partners
Customers
Standards
Reputation
Cost structure
Uncertainty
Risk tolerance
Leadership gaps

Time

Business is essentially a way to put assets to work over time. Physical assets typically depreciate with time and cash tends to go down in value due to inflation. In contrast, investments in competitive businesses have a remarkable history of going up in value over time. In order to perform this remarkably feat, businesses must keep assets productive and make continual strategic moves to stay competitive. As such, time is a fundamental constraint and techniques to use time more efficiently such as time management or efficiency practices are common management considerations.

Assets

Assets are anything physical or intangible that you own that contributes to the future cash flow of your business. An example of an asset related constraint is a slow piece of equipment on a production line. Any asset including property, plant, equipment, intellectual property or brands can represent a constraint.

Liquid Assets

Liquid assets such as cash and investments that are easily turned into cash are a special constraint. Cash is critical to paying for operating costs such as salary and if you run out of it, everything tends to fall apart.

Resources

Resource is a broad term for anything that you need to conduct business. For example, a farmer may require access to water for irrigation and a bank may require access to programmers to maintain their systems. Access to sufficient resources is a business constraint.

Quality

Quality is often cited as a business constraint. However, it's not a primary constraint but is related to other constraints such as your assets and organizational culture. Quality is also a trade-off with cost and time.

Knowledge

Knowledge is a common constraint that's often underestimated. For example, an organization may try to emulate the products or services of a top competitor but lack the know-how to achieve the same level of success.

Regulatory Compliance

In some industries, compliance with regulations and laws is a major constraint. Products, services, processes and practices that don't comply with the law can represent an significant risks to an organization.

Interests of Stakeholders

Organizations are expected to act in the best interest of their stakeholders that may include investors, employees, customers, partners, regulators and the communities in which an they operate.

Organizational Culture

Organizational culture related effects such as resistance to change is another constraint that's commonly overlooked or underestimated.

Risk Tolerance

Risk tolerance is an organization's target level of risk. This can be considered a constraint for investments, projects, new products and any strategy that represents a business risk.

Concrete Examples


A restaurant that is scheduled to open a new patio but can't find enough staff to increase their capacity.

A new product that must be launched and available to customers before the Christmas shopping season begins.

A bank that must comply with a new regulation before the end of the year.

A project with many stakeholders that requires signoff from 15 different individuals for major artifacts such as the project plan.

A new data center that can only procure 1,500 data storage devices in the next three months due to global shortages.

A small firm with no expertise in cybersecurity.

A large firm that completely relies on the expertise of a single individual to support a critical legacy system.
You can impose constraints on yourself or they can be an inherent and inescapable part of your situation.
Next: Business Assumptions
More about business constraints:
Assumptions
Business Constraints
Capabilities
Capacity Constraint
Creativity Of Constraints
Design Constraints
Project Constraints
Requirements
Theory Of Constraints
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