Understanding Business Environment: Internal and External Factors

 
Meaning
Meaning
 
The combination of internal and external factors that
influence a company's operating situation. The
business environment can include factors such as:
clients and suppliers; its competition and owners;
improvements in technology; laws and government
activities; and market, social and economic trends.
 
Components of Business
Components of Business
Environment
Environment
 
.
Business Environment
Internal Environment
Promoters/shareholder
s
Mission/objectives
Management structure
Internal power relation
Company image
Research &
Development
Human Resources
Marketing capabilities
External Environment
Micro Environment
Customers
Suppliers
Competitors
Creditors
Distributers
Macro Environment
Economic environment
Social environment
Technological
environment
Natural environment
Political environment
 
Types of Business Environment
Types of Business Environment
 
There are two types of business environment:
1.
Internal Business Environment
2.
External Business Environment
      and External environment is divided into two
categories  (a)Micro Environment &  (b)Macro
Environment.
 
Internal Environment
Internal Environment
 
These are those factors which can be controlled by
the company and they directly affect the
operations of the company.
Types of Internal Environment:
1.
Shareholders
2.
Mission & objectives
3.
Management structure
4.
Internal Power Relationship
5.
Human resources, etc.
 
External Business Environment
External Business Environment
 
Those factors which are beyond the control of
business enterprise are included in external
environment.
External Environment is divided into two parts:
1.
Micro Environment
: The environment includes
factors on which business has some control
indirectly.
2.
Macro Environment
: it includes factors on
which business has no control any how.
 
Micro Environment
Micro Environment
 
Suppliers
: The party which supplies raw material or
inputs.
Customers: 
Wholesalers, Retailers, Industries, Govt.
& other Institutions
Marker Intermediaries
:  middleman, Marketing
agencies, Financial intermediaries, physical
intermediaries
Competitors
Public
 
Macro Environment
Macro Environment
 
Economic Environment
: it refers to all the
economic factors that affect commercial and
consumer behaviour. It includes micro & macro
economic condition. The factors includes interest
rates, taxes, inflation, currency exchange rates,
savings rates, unemployment rate, recession,
depression, etc.
 
Macro Environment
Macro Environment
 
Political Environment
: it includes all the rules &
regulations, laws and roles of the govt. In the day to
day functioning of the organisations. It includes
factors like political stability, taxation policy of govt.,
foreign trade regulation, subsidies & tax concession
 
Macro Environment
Macro Environment
 
Social Environment
: influence exercised by social
and cultural factors, not within the control of
business. It includes: attitude of people to work, family
system, caste system, religion, education, marriage,
taste & preference of consumer, trends, etc
 
Macro Environment
Macro Environment
 
Technological environment
: it refers to
environment related to the technology to make
operations more easy and efficient. The factors include
innovation of new technology and upgradation of old
one to win over the competition of company.
 
Macro Environment
Macro Environment
 
Natural Environment
: it includes natural resources,
weather, climatic condition, port facilities,
topographical factors such as soil, sea, rivers, rainfall,
etc.
 Every business unit must look for these factors
before choosing  the location for their business.
 
Macro Environment
Macro Environment
 
International Environment
: it is particularly
important for industries directly depending on import
& exports.
The factors include:
Globalization
Liberalisation
Foreign Business Policies
Cultural exchange, etc.
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The business environment is shaped by a combination of internal and external factors that impact a company's operations. Internal factors like shareholders, management structure, and human resources are under the company's control, while external factors such as economic, social, technological, and political influences are beyond its control. The external environment is further divided into micro and macro environments, encompassing entities like suppliers, customers, competitors, and various market intermediaries.


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  1. Meaning The combination of internal and external factors that influence a company's operating business environment can include factors such as: clients and suppliers; its competition and owners; improvements in technology; laws and government activities; and market, social and economic trends. situation. The

  2. Components of Business Environment . Business Environment External Environment Internal Environment Promoters/shareholder s Mission/objectives Management structure Internal power relation Company image Research & Development Human Resources Marketing capabilities Macro Environment Economic environment Social environment Technological environment Natural environment Political environment Micro Environment Customers Suppliers Competitors Creditors Distributers

  3. Types of Business Environment There are two types of business environment: Internal Business Environment 2. External Business Environment and External environment is divided into two categories (a)Micro Environment & (b)Macro Environment. 1.

  4. Internal Environment These are those factors which can be controlled by the company and they directly affect the operations of the company. Types of Internal Environment: Shareholders 2. Mission & objectives 3. Management structure 4. Internal Power Relationship 5. Human resources, etc. 1.

  5. External Business Environment Those factors which are beyond the control of business enterprise are included in external environment. External Environment is divided into two parts: 1. Micro Environment: The environment includes factors on which business has some control indirectly. 2. Macro Environment: it includes factors on which business has no control any how.

  6. Micro Environment Suppliers: The party which supplies raw material or inputs. Customers: Wholesalers, Retailers, Industries, Govt. & other Institutions Marker Intermediaries: middleman, Marketing agencies, Financial intermediaries Competitors Public intermediaries, physical

  7. Macro Environment Economic Environment: it refers to all the economic factors that affect commercial and consumer behaviour. It includes micro & macro economic condition. The factors includes interest rates, taxes, inflation, currency exchange rates, savings rates, unemployment depression, etc. rate, recession,

  8. Macro Environment Political Environment: it includes all the rules & regulations, laws and roles of the govt. In the day to day functioning of the organisations. It includes factors like political stability, taxation policy of govt., foreign trade regulation, subsidies & tax concession

  9. Macro Environment Social Environment: influence exercised by social and cultural factors, not within the control of business. It includes: attitude of people to work, family system, caste system, religion, education, marriage, taste & preference of consumer, trends, etc

  10. Macro Environment Technological environment related to the technology to make operations more easy and efficient. The factors include innovation of new technology and upgradation of old one to win over the competition of company. environment: it refers to

  11. Macro Environment Natural Environment: it includes natural resources, weather, climatic condition, topographical factors such as soil, sea, rivers, rainfall, etc. Every business unit must look for these factors before choosing the location for their business. port facilities,

  12. Macro Environment International Environment: it is particularly important for industries directly depending on import & exports. The factors include: Globalization Liberalisation Foreign Business Policies Cultural exchange, etc.

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