If any business wants to succeed in the market, it is essential to understand its factors. One should consider both the positive and negative sides of the business and plan strategies accordingly. This is why it becomes essential to examine internal and external factors when creating a plan.
What is a Business Environment?
The business environment represents all factors that affect the company’s work, including employees, customers, management, supply, demand, and business regulations. It can be Internal or external.
Knowing the business environment is the first step for better planning and implementation. ‘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, knowing all the inside and outside factors that influence business activities becomes essential. 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.
- FinancRelationshipeting Resources
- Human Resource
- Internal Technology Resources & Dependencies
- Interpersonal Relationship with employees
- Labour Management
- OrganiRelationshipucture 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
Many internal factors include policies and plans, value propositions, human resources, financial and marketing resources, labor management, financial forecasts, etc. Apart from all this, many more factors are still within a company or business.
Internal Factors refer to all those factors taking place within the company or under its control, irrespective of whether tangible or intangible. These factors turn out to be important in knowing the strengths and weaknesses of the business. Anything going positive is referred to as a “Strength,” and anything that affects the business’s normal working is known as a “Weakness.” There are enough things that are to be taken into consideration.
Many internal factors include policies and plans, value propositions, human resources, financial and marketing resources, labor management, financial forecasts, etc. Apart from all this, many more factors are still 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 strengths and weaknesses of the company. It all depends on the employee’s attitude, 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 and an effective system, it should be sure that it also has an excellent and well-furnished infrastructure. The company should ensure it has all kinds of facilities, good power, and an internet connection.
3) Innovation—The competition is way too high in any decade for businesses. 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 increase productivity, 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 internal factors, external factors include factors that lie outside the business. In easy terms, external factors look at the whole environment and draw conclusions based on it.
External factors are divided into two parts: micro and macro. Micro factors include Customers, Suppliers, Competitors, the Public, Talent, etc. At the same time, Macro factors include Economic, technological, and natural factors.
External factors are divided into two parts: micro and macro. Micro factors include Customers, Suppliers, Competitors, the Public, Talent, etc. At the same time, Macro factors include Economic, technological, and natural factors.
For better understanding, we should now know the factors affecting a business’s internal and external aspects.
External Factors include the things that lie outside of any business house. Let us know about the factors affecting –
1) Economic Position—The Economy is the most essential term for any business. Businesses should know how well they perform and avoid an economic crisis soon.
2) Customers—Customers are a business’s primary source of income and are known as its saviors. The company should meet customers’ demands and keep them updated by providing quality products.
3) Competition—Competition exists even in the smallest things. Businesses have stiff competition among themselves. Competition is necessary as it brings benefits to any business, such as innovation. Competition is necessary for 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