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Business Environment

Definition

What is a business environment?

The business environment is the internal and external elements that impact a company’s operations position.

These factors may include employees, customer needs, supply and demand, clients, suppliers, market trends, and economic changes.

These may be found outside or inside the organization that can affect the company’s performance, profitability, and growth.

Understanding the nature of the business environment is vital, this helps to ensure that the company has the right strategy to succeed not only in the present times but also in the future.

What is a business environment?

Types of business environment

There are two types of business environments that you will be looking into – internal and external factors.

Internal environment

The internal environment consists of the factors that are under the control of the company which help them to adapt to the external environment and to achieve their goals.

The business environment factors present within a business organization define the company’s characteristics. These include the work culture and management. 

Value system

Business values define how its employees perform according to their roles. A value system is a business function that judges the worth of the organization and how its work culture will be managed.

Business path

Every company has a reason and purpose to serve and meet the needs of others. To establish a good business path, you should have a mission and vision.

Mission and vision allow you to see the future of the business. These two factors clarify the changes needed to execute into the business framework.

Organizational structure

Established businesses have the proper organizational method that helped them to be where they are right now. 

The organizational structure contains the hierarchical structure of the business. With this factor, you can easily identify the role of each employee and management.

There are different types of organizational structures like matrix, functional, product, network, among others. In the simplest form, organizational structures are made to identify who reports to whom and to provide better communication skills.

Business Culture

Every business leader has their own ways of handling the business, this results in unique business culture.

Business cultures may be undefinable in exact terms but this includes the treatment of employees, handling resources, and proper dealing with clients.

Human Resources

Human Resources (HR) plays an important role in defining the business environment. With the continuous growth of the business, the management of employees is minimally managed by human resources.

Equipment

Business competition is evolving endlessly, to be able to exceed your competitors your company must possess better and advanced equipment.

Modern technology continuously defines a business environment both from inside and out. From the inside, it depends on the tech being used by the company, and from the outside, it depends on the technology used by its competitors.

External environment

Business is socio-economic and several aspects of society play a role in business success or failure. The external environment represents the various factors outside the company’s control. 

The common term given to external business environment factors is PESTLE. PESTLE stands for Political, Economic, Social, Technological, Legal, And Environmental factors of the business.

Political factors

Many countries have laws regarding establishing a business; others restrict businesses. The state of local politics highly affects the business condition.

Economic factors

Whether a large or small business, the economic factors in most countries are highly tense. However, the open market has been highly helpful in every business.

Since the global economy is unstable, businesses must be careful of their actions at all times.

Types of business environment

Social factors

In today’s era, society easily grasps the attention of any business. Every society has its unique taste and choices. 

This factor affects businesses worldwide. Society brings out the new trend that can lead to a rise in demand for a certain product or service.

Technological factors

Technology is one of the fastest evolving and innovating things in the world. Businesses that are unable to catch up to the current technological needs are having a hard time establishing their brand.

While businesses that are using the latest technology to their advantage are now way ahead of their competitors. Information technology has now become a leading business due to its huge demand.

Legal factors

Rules, laws, and regulations are primary factors that every business should consider in their external environment.

There are laws for businesses in every country across the globe and every business has to follow these laws. Many businesses think that these laws were made to drag them down but little did they know that regulations help their business to prosper.

Environmental factors

The world is currently facing an environmental crisis and is a factor for business development, businesses are expected to cope up with these problems.

Environmental factors like the cold season bring down the agricultural business but it can boost tourism. Businesses focus on organizing a strategic way to handle these factors.

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