Question

External and internal environmental factors are equally important for a business organization.explain

Answer 1

Answer : There are a lot of factors contributing to the success of a business organisation which comes from both outside and inside a business(i.e. Internal and External Enviromental Factors). Both the internal as well as the external factors are of utmost importance for the development of a business.

In order to understand the importance of both internal and external factors of business environment it is important to understand the basics of business environment and its constituents.

BUSINESS ENVIRONMENT : The environment of a business is determined by the aggregate of all the intenal factors(controllable) and the other forces that are outside the control of an organisation but the business still depends upon them as they affect the overall performance and sustainability of the business organisation.

There are two types of factors the business environment consists of :

- Internal Factors

- External Factors

INTERNAL FACTORS : factors that are under the control of the company no matter whether they are tangible or intangible are known as internal factors. These factors after being figured out are grouped into the strengths and weaknesses of the company. If an element brings positive effects to the company, it is considered as a strength otherwise a weakness.

There are 14 types of internal environment factors :

1. Human Resources
2. Technology
3. Corporate Image
4. Value Proposition
5. Labour Management
6. Assets
7. Policies and Plans
8. Marketing and Financial Resources
9. Quality and size of Infrastructure
10. Task Executions or Operations
11. The founders decision making power
12. Inter-personal Relationship
13. Organizational Structure
14. Financial Forecast

EXTERNAL FACTORS : factors that are not under the control of the company no matter whether they are tangible or intangible are known as external factors. As these factors are uncontrollable the outside environment allows businessmen to take suitable adjustments to their marketing plan to make it more adaptable to the external environment.

There are two sub-categories of external factors :

Micro factors :

1. Customers
2. Input or Suppliers
3. Competitors
4. Public
5. Marketing & Media
6. Talent

Macro factors :

1. Economic
2. Political/legal
3. Technology
4. Social
5. Natural

IMPORTANCE OF BUSINESS ENVIRONMENT :

Meeting Competition : the environmental factors enable a firm to analyze its competitor's actions and strategies as it is utmost important to be aware of the strategies and actions of the competitiors in order to survive.

Continuous Learning : the external environment of a business constantly keeps changing therefore the managers and other employees(internal factors) have to continuously update their knowledge and skills.

Image Building : the image/goodwill of a business can improve to a great extent if the business organisation displays sensitvity to its environment.

Determining Business Opportunities and Threat : the interaction between business and its environment(considering both internal and external factors) highlights the opportunities and threats for the business organisation. It can not be determined by just considering any one of the factors.

Giving Direction For Growth : it becomes easier to identify areas for growth and expansion if the environmental factors are contantly considered for all the decision making.

CONCLUSION

It is clear from the above stated facts that both the internal and the external environmental factors are equally important for a business organisation. There are a bunch of factors the success of the company depends upon. Either outside or inside, factors are of utmost importance for the development of the company. If a business hopes to perform smoothly and successfully, it needs to take all these elements into consideration before making any decision.