The Internal and External Environment of Business

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Distinguish between internal and external environment of business and in each case explain five components of the environment.

The term business, in economic sense means human activities which are performed with the objectives of earning profits. Human activity for earning profit may be in the form of production, extraction or purchase of goods for sale. It is expected of business to provide goods and services to the society in an effective manner. Thus, in today’s competitive environment, survival of business unit is not possible without customer satisfaction. In an effort to achieve all this, a business entity has to interact with its internal as well as its external environments.

According to Janin, Trehan and Trehan (2010), business environment refers to those aspects of the surroundings of business enterprise which have influence on the functioning of business. The world is dynamic and at times it undergoes through some changes which the business entity should be able to read so as to adapt well to these changes and hence be in a position to be able to continue its operations.

It true that the managers cannot always regulate or control their environments, so it is always better to be aware of any changes that occur or that may occur, simply because these changes ultimately affect their daily day actions and decisions. For example, media reforms in Zimbabwe that led to the opening up of airwaves in broadcasting to other players has had an impact on the operations of the Zimbabwe Broadcasting Corporation’s radio and television channels. Also, related to this, was the coming on board of the free to air satellite dishes, which have made it possible for people in Zimbabwe to have access to other channels other than the ZBC channels. Thus, for the managers of those existing channels, it was not at all possible to ignore the increased service and competition brought about by the coming on board of competitors. It is therefore a fact that, If managers do not respond to competition in appropriate time, then this will turn lethal for their organisation.

A business can never be profitable if it is ignoring the dynamic internal and external environment. By examining the internal and external environment, an organization develops its long term objectives and then it chooses a particular strategic pathway to achieve those objectives. But this entire process can be completed only after a careful analysis of internal and external environment.

According to businessdictionary.com, the internal environment of business are the conditions, entities, events and factors within an organisation that influence its activities and choices, particularly the behaviour of the employees. An organization’s internal environment is actually, composed of multiple elements existing within the organization, including management, current employees and most importantly corporate culture, which ultimately defines the employee behaviour. Trehan et al (2010) concur with this when they state that, internal environment includes internal factors of the business which can be controlled by the business. It refers to environment within the organisation. It includes objectives of the business, managerial policies, different departments of the organisation, management and employees of the organisation, labour management relationships, brand image and corporate images, physical resources including infrastructure available within the business, vision and thinking of top management, research and development activities of the organisation, working conditions in the organisation, morale and commitment of human resources and so on.

The components of internal environment are usually within the control of business. Quality of human resources, a component of internal environment is largely responsible for success or failure of the business entity. If employees of an organisation are skilful and committed, then they can take the business entity...
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