Business Environment

Environment of any organisation is "the aggregate of all conditions, events and influences that surround and affect it"
Environment includes all factors - internal and external - which have a influence on the functioning of business

Types of Environment

Internal Environment

External Environment

Internal factors are generally regarded as controllable factors because the firm has control over these factors The firm can alter or modify some of the factors such as its personnel, physical facilities, organisation and functional means to suit the environment The internal environment determines a strength or weaknesses of a business organisation

External factors, on the contrary, are beyond the control of the firm External factors such as economic factors, sociocultural factors, government and legal factors etc are generally regarded as uncontrollable factors They present the environment with several threats and opportunities

Factors Influencing Business Business Environment

Internal Environment

External Environment

Micro Environment

Macro Environment

Internal Environment/Factors
(a) Value system: Value system is important attribute that determines an organisations attitude, ethical standards, code of conduct, dedication to work, loyalty, social responsibilities etc. (b) Mission and objectives: Missions and objectives help an organisation in choosing the best course of action and decide where the organisation wants to reach in the future. (c) Management Structure and Nature: A well defined organisational structure helps in attaining proper coordination in all activities of business and efficient and uninterrupted communication. (d) Internal Power Relationship: Good employee-management relations, management- owners relations show stronger internal power relationships

(e) Human Resources: well trained and skilled human resource is the key to a successful business
(f) Company Image and Brand Equity: Another internal factor affecting business relates to its image and brand equity. The image that a company enjoys in the eyes of the shareholders influences its functioning to a large extent

(g) Miscellaneous Factors: In addition to the above, other internal factors effecting business are- Physical assets and plant layout facilities, R and D and technological capabilities Marketing resources, Financial resources etc.

External Environment/Factors

Micro Environment

Macro Environment Economic Political and Legal

Suppliers
Customers

Socio cultural Competitors

Technological
Intermediaries Financers Public Global Physical Demographic

Micro Environment