If any business wants to succeed in the market, it is essential to understand its factors in the upper direction. One should both the positive and negative side of the business and plan strategies according to it. This is why it becomes essential to examine internal and external factors for creating a plan.
What is a Business Environment?
The business environment represents all factors that affect how the company works, including employees, customers, management, supply, demand, and business regulations. A business environment can be Internal and external.
Knowing the business environment is the first step for better planning and implementation. The term ‘environment’ refers to the surroundings or conditions where the business activity is needed. Business is a social activity where the goals can only be achieved when the owner or business goes collective in all terms. Therefore, it becomes essential to know all the inside and outside factors that influence the business activities. In easy terms, internal and external environments create a business environment.
Internal business environment factors
Internal business environment factors are factors within the company such as:
- Corporate Image and brand equity
- Financial Forecast
- Task Executions or Operations
- The founder’s relationship and their decision-making power.
- Financial and Marketing Resources
- Human Resource
- Internal Technology Resources & Dependencies
- Interpersonal Relationship with employees
- Labour Management
- Organizational structure or, in some cases, Code of Conduct
- Plans & Policies
- Plant/Machinery/Equipment (or you can say Physical assets)
- Quality and size of Infrastructure
- Value Proposition
There are many internal factors like policies and plans, value proposition, human resources, financial and marketing resources, labor management, financial forecast, etc. Apart from all this, there are still many more factors that are within a company or business.
Internal Factors refer to all those factors taking place within the company or under the company’s control irrespective of whether it is tangible or intangible. These factors turn out to be important in knowing the strengths and weaknesses of the business. If anything that is going positive is referred to as “Strength,” anything that affects the business’s normal working is known as “Weakness.” There are enough things that are to be taken into consideration.
There are many internal factors like policies and plans, value proposition, human resources, financial and marketing resources, labor management, financial forecast, etc. Apart from all this, there are still many more factors that are within a company or business.
As the internal factors include the things that lie within the company, now let us know their factors affecting –
1) Human Resources – Human Resources means the employees of the company. The employees can become both the strength and weaknesses of the company. It all depends on the employee’s attitude towards work, skills, performance, etc. The company should also look after the training and development of their employees. The company should, in turn, give regular incentives to its employees.
2) Infrastructure – When an organization has well-trained employees, an effective system, it should be sure that they also have a good and well-furnished infrastructure. The company should look after that their company has all kinds of facilities, good power, and internet connection.
3) Innovation – The competition is way too high in any decade for the business. No company can survive without upgrading its ideas and technology. Innovation means the introduction of something new that would benefit the consumer as well as the business. A good and successful innovative idea can bring more productivity, increase in revenue, and brand value.
Apart from these, more points affect the internal working of any business.
External business environment factors
External business environment factors represent all factors outside and under no control of the company, such as
Micro factors:
- Customers
- Input or Suppliers
- Competitors
- Public
- Marketing & Media
- Talent
Macro factors:
- Economic
- Political/legal
- Technology
- Social an
- Natural
Just opposite to the internal factors, external factors include the factors that lie outside the business. In easy terms, we can say it looks at the whole environment and based on it; conclusions are drawn.
The external factors are divided into two parts, i.e., micro and macro. Micro factors include Customers, Suppliers, Competitors, Public, Talent, etc. At the same time, the Macro factors include Economic, technology, natural, etc.
The external factors are divided into two parts, i.e., micro and macro. Micro factors include Customers, Suppliers, Competitors, Public, Talent, etc. At the same time, the Macro factors include Economic, technology, natural, etc.
For better understanding, we should now know the factors affecting internal and external factors of a business.
External Factors include the things that lie outside of any business house. Let us know about the factors affecting –
1) Economic Position – Economy is the most important term of any business. The business should know how well their business performs and look after no economic crisis soon.
2) Customers – The customers are the primary source of any business. Customers are known as the saviors of any business. The business should look after the demands of the customers and keep them updated by providing quality products.
3) Competition – Competition exists even in the smallest things. The business has stiff competition among themselves. Competition is necessary as it brings a good side for any business, such as innovation. Competition is necessary for a change.
These are factors, and aside from these, many factors affect the external environment.
After leaving Wells Fargo Bank in 2014, Daniel began a career as a finance consultant, advising companies and individuals on economic policy, labor relations, and financial management.
At Nimblefreelancer.com, Daniel writes about personal finance topics, value estimation, budgeting strategies, retirement planning, and portfolio diversification.
Read more on Daniel Smith's biography page.
Contact Daniel: daniel@nimblefreelancer.com
