Components of business environment

Do you know what the difference between the internal and external environment ?

The internal and the external environment can be differentiated on the  basis of their influence on the functioning of an organisation. Further, it can also be differentiated on the basis of which can be controlled and to what extent.

The environment which directly affects the day to day operation of an entity is internal environment. It is the periphery of the organisation on which entity has a measurable control. And it's success is critically determined by how effectively it manages the internal factors such as employees and their union, competitors,suppliers, customers etc.

The external environment is combined forces which indirectly affect company’s operation and working condition. These factors are uncontrollable and the company is powerless and incapable of exercising any control over them.

Thus, Business environment can  be described in terms of the opportunities and threats operating in the external environment apart from the strengths and weaknesses existing in the internal environment.

In order to achieve the organisational goals an entity should focus on the internal environment. This shows the strength and weakness of the entity to lead the market on the basis of market opportunities and threats.

The success of the entity largely  depends upon the how the organisation uses its strength to cope with an environment that is external environment to the entity. On the other hand , it is equally important to understand and minimize the threats and taking necessary decisions for improving their weaknesses.

The understanding of the external environment, in terms of  the opportunities and threats, and the internal environment, in terms of the strengths and weaknesses, is crucial for  the  existence, growth and profitability of any organization.

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