Components of Business Environment

Page 1 of 10

Components of Business Environment

By | December 2011
Page 1 of 10
Components of business environment
On the basis of extent of intimacy with the firm, the environmental factors may be classified into different levels or types. There are broadly two types of environment, the internal environment, i.e. factors internal to the firm and the external environment i.e. factors external to the firm which have relevance to it. The internal factors are generally regarded as controllable factors because the company has control over these factors; it can alter or modify such factors as its personnel, physical facilities, organisation and functional means such as marketing mix to suit the environment. The external factors on the other hand are, by and large, beyond the control of a company. The external or environmental factors such as the economic factors, socio-cultural factors, government and legal factors, demographic factors etc., are therefore generally regarded as uncontrollable factors. Some of the external factors have a direct and intimate impact on the firm (like the suppliers and distributors of the firm). These factors are classified as micro environment, also known as task environment and operating environment. There are other external factors which affect an industry very generally (such as industrial policy, demographic factors etc.). they constitute what is called macro environment, general environment or remote environment. We may therefore consider the business environment at three levels: •Internal environment

Micro environment/ task environment/ operating environment •Macro environment/ general environment/ remote environment Although business environment consists of both internal and external environments, many people often confine the term to the external environment of business.

Internal Environment:
The important internal factors which have a bearing on the strategy and other decision are outlined below.  Value system: The value system of the founders and those at the helm of the affairs has important...