Business Environment Analysis: Internal vs External

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  • 0:03 The Business Environment
  • 0:55 Internal Analysis
  • 2:45 External Analysis
  • 3:45 Lesson Summary
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Lesson Transcript
Instructor: Allison Tanner

Allison has a Masters of Arts in Political Science

The internal and external environments have different impacts on your business. The lesson discusses what to look for when doing internal and external analyses and what a business can gain from doing these analyses.

The Business Environment

Imagine that you run an athletics store, Tip Top Sports, in your hometown. You specialize in producing local high school and college apparel. You've been open for about 10 years, and recently you've noticed that you haven't quite met your business development goals.

In order for you to figure out what's impacting your business, your local consultant suggests that you do an analysis of your business environment. He explains that your business environment is the setting (or system) that your business operates in. This can be the internal environment, which is dominated by things such as your staff or financial status; or it can be the external environment, which includes factors like politics or competitors. Because each environment will tell you different information about your business, you will want to analyze both the internal and external environments.

Internal Analysis

Your internal business environment is the conditions or situation within your company's day-to-day operations. When analyzing your internal environment, you want to identify how the internal operations are affecting your business. You want to look at such things as:

  • Effectiveness of your management team
  • Quality of employee relationships
  • Communication between departments
  • Overall quality and motivation of staff members

For example, let's say that Tip Top Sports has twenty employees who focus on sales: five in marketing, and two in design. Although you own the business, your general manager, Ben, oversees the daily functions. Ben is a kind manager, but he has had no previous management experience. As you start to look at daily tasks, talk to the team members, and evaluate performance, you find out that design deadlines are not being met and orders are consistently late. Furthermore, you find out that Ben isn't taking steps to increase efficiency or find solutions to speed up the design team.

There also seems to be a problem with the direct sales team. Ben says staff members aren't showing up at their scheduled times, and they are complaining about one another during breaks. Also, things on the floor seem tense. He tells you that he's afraid the customers have noticed the frustration among staff members.

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