Internal and external environmental factors affecting business pdf

Posted on Friday, June 4, 2021 10:51:24 PM Posted by Leah M. - 05.06.2021 and pdf, free pdf 2 Comments

internal and external environmental factors affecting business pdf

File Name: internal and external environmental factors affecting business .zip

Size: 25761Kb

Published: 05.06.2021

Document Viewer If these are scarce then poverty, starvation, unemployment and backwardness will adversely affect the business … The entire social as well as business environment duly effect to the HR concepts, practices and performance in a wide range of operations. Internal and external business environment, Business environment ppt bec doms mba 10, Internal Factors Affecting Business Environment. We cannot live a healthy life in a polluted environment. It is common for managers to assess each of these factors closely.

What Are Internal & External Environmental Factors That Affect Business

Organizational environment denotes internal and external environmental factors influencing organizational activates and decision making. Every organization, whether business or non-business, has its environment. The organizational environment is always dynamic and ever-changing.

Changes today are so frequent and every change brings so many challenges that managers and leaders of the organization need to be vigilant about the environmental changes. The environment of an organization consists of its surroundings — anything that affects its operations, favorably or unfavorably.

The environmental forces abstracts and visible need careful analysis. The systematic and adequate analysis produces the information necessary for making judgments about what strategy to pursue. Managers cannot make appropriate and sound strategy simply based on their guesses and instincts.

And we know that organization is a social entity that has a hierarchical structure where all necessary items are put together and they act within it to reach the collective goal.

Organizations or more specific business organizations, and their activates are always being affected by the environment. In an organization, every action of the management body is influenced by the environment. Therefore, the managers need to make an in-depth analysis of the elements of the environments so that they can develop in themselves an understanding of the internal and external situations of the organization.

Based on their understanding, they will be better able to establish the required objectives for their organization and formulate appropriate strategies to achieve those objectives. Forces or conditions or surroundings within the boundary of the organization are the elements of the internal environment of the organization. Based on those resources, the organization can create and deliver value to the customer.

Organizations build capabilities over a long time. They consistently invest in some areas so that they can build strong competitive businesses based on the uniqueness they have created. The top management has to balance the conflicting demands of both as resources are always finite.

For example, General Electric is an aggressive innovator and marketer who has been ruthless in its approach to changing proactively as well as reactively to sustain its competitive positions in the respective industries.

This implies that over the years General Electric has invested in developing those capabilities, systems, and processes that enable it to respond.

Owners are people who invested in the company and have property rights and claims on the organization. Owners can be an individual or group of persons who started the company; or who bought a share of the company in the share market. Owners of an organization may be an individual in the case of sole proprietorship business, partners in a partnership firm, shareholders or stockholders in a limited company or members in a cooperative society.

In public enterprises, the government of the country is the owner. Owners play an important role in influencing the affairs of the business. This is the reason why managers should take more care of the owners of their organizations. Individual employees and also the labor unions they join are important parts of the internal environment. But ill-management of the workforce could lead to a catastrophic situation for the company.

Organizational Culture Organizational culture is the collective behavior of members of an organization and the values, visions, beliefs, habits that they attach to their actions. Organizational culture or corporate culture significantly influences employee behavior. A strong culture helps a firm achieve its goals better than a firm having a weak culture. Since culture is an important internal environmental concern for an organization, managers need to understand its influence on organizational activities.

Resources of the Organization An organization s resources can be discussed under five broad heads: physical resources, human resources; financial resources, informational resources, and technological resources. Physical resources include land and buildings, warehouses, all kinds of materials, equipment and machinery. Human resources include all employees of the organization from the top level to the lowest level of the organization. Examples are teachers in a university, marketing executives in a manufacturing company, and manual workers in a factory.

Financial resources include capital used for financing the operations of the organization including working capital. Examples are investment by owners, profits, reserve funds, and revenues received out of a sale. Examples are sales forecasts, price lists from suppliers, market-related data, employee profile, and production reports. High reputation or goodwill develops a favorable image of the organization in the minds of the public so to say, in the minds of the customers.

The internal environment of an organization consists of the conditions and forces that exist within the organization. An organization has full control over these situations. Unlike the external environment, firms can directly control the internal environment. These factors are detailed out below. Factors outside or organization are the elements of the external environment.

The organization has no control over how the external environment elements will shape up. Because of their general nature, an individual organization alone may not be able to substantially control their influence on its business operations. Managers have to continuously read signals from the external environment to spot emerging opportunities and threats.

The external environment presents opportunities for growth leadership, and market dominance, it also poses the threat of obsolescence for products, technology, and markets. While one section of an organization faces opportunities, another faces threats from a similar environment, perhaps because there is differentiation in their respective resources, capabilities and entrenched positions within the industry.

For example, the burgeoning mobile telephone market in India provides enormous opportunities for different types of organizations from handset manufacturers, content developers, application developers, mobile signal tower manufacturers, to service providers. At the same time, it poses a threat to the fixed-line telephone business which for a long time, has been the monopoly of public sector enterprises.

The increasing demand for telecommunication services in India post-deregulation was an enormous opportunity for early entrants to enter the telecom services business and compete for revenue with state-owned organizations. At the same time, the growing demand for mobile services led to an expansion of industrial capacity, price wars, lowering of call tariffs, acquisitions, and declining industry profits.

India has one of the lowest call rates in the world. As the industry matured and consolidation took place, the old players had to alter their business models and strategies. The general environment usually includes political, economic, sociocultural, technological, legal, environmental natural and demographic factors in a particular country or region. The general environment consists of factors that may have an immediate direct effect on operations but influences the activities of the firm.

The factors of the general environment are broad and non-specific whereas the dimensions of the task environment are composed of the specific organization. The organization has no or little control over these factors; that means, the external environment is generally non-controllable. However, there may be exceptions.

The external environmental factors reside outside the organization, which can lead to opportunities or threats. The general environment consists of those factors in the external environment that indirectly affect the business operations of firms. The industry environment consists of those factors in the external environment that exist in the industry in which the organizations operate their business.

The industry environmental factors are generally more controllable by a firm than the general environmental factors. Industry environment comprises those factors in the external environment that exists in tie concerned industry of a firm in which it is operating its business. It may be noted that some industry environmental factors such as competitors and substitute products may-exist even outside the concerned industry.

For example, a leasing company may emerge as a competitor of the companies in the banking industry in terms of attracting deposits and providing loans to business houses.

Regarding the industry environment, the important issue to appreciate is that they reside in the immediate competitive situations of a firm. Also, they are very specific in the sense that they can be easily identified. The strategy-makers must understand the challenges and complexities of both the general environmental factors and the industry environmental factors. They need to appreciate that the general environmental factors are largely non-controllable because of their distantly located external nature.

When strategists take into cognizance of both the general remote and industry operating environments, they are likely to become more proactive in strategic planning. The general environment includes the; distant factors in-the external environment that is general or common in nature. Its impact on the operations of the firm, its competitors and customers make its analysis imperative. Along with these, we can add additional factors that suit the current modern business atmosphere. The political factors of the general environment refer to the business-government relationship and the overall political situation of a country.

A good business-government relationship is essential to the economy and most importantly for the business. Some countries, such as India, pursue state-driven mercantilism to reduce imports and increase exports. Some countries; have liberalized their economy and shifted from centrally managed economy to a capitalist economy or welfare economy. In many 3rd world countries, the successive governments are emphasizing more on privatization rather than on state ownership.

As global competition has increased, the government has also liberalized its trade policies to be in line with the WTO agreements. Another important issue is political stability that affects the operations of business firms substantially. Evert decision about investment is highly affected by political stability. We have seen in several countries in Asia, Africa, Latin America, how political instability has in the past affected investment and trading in the country.

Besides, government agencies and pressure groups special interest groups are also exercising influences on business operations of firms that have a political character. Managers must be able to understand the implications of the activities of these agencies and groups. Government agencies include different ministries, the office of the Controller of Imports and Exports, Board of Investment, National Board of Revenue, etc.

Since the pressure groups put restraints on the business managers, managers should have clear ideas about the actions of these groups. Economic Factors The economic factor of an organization is the overall status if the economic system in which the organization operates.

The important economic factors for business are inflation, interest rates, and unemployment. These factors of the economy always affect the demand for products. During inflation, the company pays more for its resources and to cover the higher costs for it, they raise commodity prices. When interest rates are high, customers are less willing to borrow money and the company itself must pay more when it borrows.

Examples of economic factors include the trend in economic growth, income levels of population, inflation rate, tax rates for individuals and business organizations, etc.

The economic environment comprises a distinct variable with which management must be concerned. The economy of a country can be in a situation of boom or recession or depression or recovery or it may be in a state of fluctuation. These people are likely to become customers when they have purchasing power. And purchasing power depends on income, prices, savings, debt and availability of credit.


Organizational environment denotes internal and external environmental factors influencing organizational activates and decision making. Every organization, whether business or non-business, has its environment. The organizational environment is always dynamic and ever-changing. Changes today are so frequent and every change brings so many challenges that managers and leaders of the organization need to be vigilant about the environmental changes. The environment of an organization consists of its surroundings — anything that affects its operations, favorably or unfavorably.

Internal and External Environment Factors that Influences Organizational Decision Making

The market environment or business environment is a marketing term and refers to factors and forces that affect a firm's ability to build and maintain successful customer relationships. The business environment has been defined as "the totality of physical and social factors that are taken directly into consideration in the decision-making behaviour of individuals in the organisation. The analysis of the macro marketing environment is to better understand the environment, adapt to the social environment and change, so as to achieve the purpose of enterprise marketing. The forces close to the company that affects its ability to serve its customers include-the internal environment, suppliers customers, marketing intermediaries, competitors and publics. The larger societal forces that affects the whole micro environment include-the demographic environment, the political environment, the cultural environment, the natural environment, the technological environment and the economic environment.

What Are Internal & External Environmental Factors That Affect Business?

Marketing strategy is a very important aspect of making a business successful. The absence of a clear strategy, setting up meaningful objectives and goals can be very difficult. While drafting a Marketing strategy, conducting a macro environment analysis within which the business is operating will help in determining the outcomes of a strategy. This analysis includes political, economic, social-cultural, technological, legal and environmental factors that affect business. These strategic analysis tools consider all the factors that may affect the business operations. Environmental factors can be explained as identifiable elements within the cultural, economic, demographic, physical, technological or political environment which impacts the growth , operations and survival of an organization. Environmental factors can be both internal as well external for the business.

A business concept that looks perfect on paper may prove imperfect in the real world. Sometimes failure is due to the internal environment — the company's finances, personnel or equipment. Sometimes it's the environment surrounding the company.



  • The impact of external and internal factors on organization of operation at company level is studied. Cami G. - 07.06.2021 at 11:09
  • To browse Academia. Royale B. - 11.06.2021 at 19:21