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Environmental Factors of Business

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  • 0:01 The Business Environment
  • 0:29 Internal Factors
  • 1:24 External Factors
  • 2:19 Management Reaction
  • 2:42 Lesson Summary
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Instructor: Paul Mckinney

Paul has been in higher education for 17 years. He has a master's degree and is earning his PhD in Community College Leadership.

Environmental business factors can affect the organization in their day-to-day operations. Management needs to carefully plan and take into account these factors when doing business.

The Business Environment

Business environments consist of all those factors that have a bearing on the business. The term business environment implies that internal and external factors have an impact on the individual organization. A business environment includes both specific and general factors. Specific factors affect the individual organization in its day-to-day operations. General factors have an impact on an entire industry and affect individual organizations equally.

Internal Factors

Internal environment factors have a direct impact on the individual organization. The organization has some control over internal factors. It can alter or modify such factors, as the manager's deem appropriate. Here are a few of the internal environmental factors of business that can be changed when needed:

  • Value System: A value system includes the culture and norms of the organization. In other words, it's the regulatory framework of an organization and every employee has to act within the limits of this framework. The value system can be changed or replaced at any moment based on the direction of upper management.
  • Mission and Objectives: Different priorities, policies, and philosophies of a business can affect the mission and objectives.
  • Internal Relationships: Factors like the amount of support the management enjoys from its shareholders, employees, and the board of directions all affect the smooth functions of an organization.

External Environmental Factors of Business:

The external factors in a business environment have an indirect influence on the organization. The factors are uncontrollable by the organization and can be hard to predict. Here are a few examples of external environmental factors of business:

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