BUSINESS ENVIRONMENT

 BUSINESS ENVIRONMENT



It is the surrounding of a business which affects, influences the operations of an organization.

 A business environment can be classified into 2 types as the Internal environment, External environment.

The internal environment

The internal environment of an organization is the factors that are within the firm. These components can directly influence the business, is mostly controllable by the enterprise. The internal environment includes owners, managers, staffs, structure, culture, and resources of the organization. These factors of the internal environment create the strengths, and weaknesses of the firm.


The external environment

External environment consists external factors which are uncontrollable, influences on the operation of an organization. This environment generates opportunities, threats to the enterprise. 

External environment can be divided into 2 types as 

  1. Micro/ immediate environment
  2.  Macro/ general environment. 

Micro environment includes the organizations, people who directly influence on the functions of the business, not within the organization. Customers, suppliers, competitors, market mediators are the factors of an immediate environment.



Macro environment is the wide surrounding that includes demographics, technological, legal, natural, economic, political, social and cultural environments. The general environment indirectly influences on the organizational function. The business environment is a changing, unpredictable environment. Therefore, it is important to understand the environment, continuously analyze it to become a successful business organization.

Firms use SWOT analysis which is designed to get a better understanding of a business environment.



Example:

Internal environment- The owner in the internal environment of an organization would be considered as a strength of the business organization if the owner is financially stable, when the owner has a vast knowledge, experience on running a business. The owner would be a weakness to the organization when the owner is financially unstable, unexperienced, ignorant about running the business.

External environment –

1) Micro environment- Suppliers who are a factor of the micro environment of an organization can be an opportunity to the firm when quality materials are provided, when the materials are supplied on time. Suppliers can be a threat to the organization when low-graded materials are provided, when the materials are not supplied on time.

2) Macro environment-Natural environment which is a factor that comes under the macro environment of an organization can be an opportunity when new resources that can be used for the production is being found. It can be a threat when natural disasters interrupt the business activities.

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