A business can either be affected by internal or external environmental factors. Internal elements affect the business from within and can be easily handled by the management. Examples of three internal environmental influences are the organization’s structure, the firm’s culture, and availability of resources. For example, if the organizational structure doesn’t give freedom to workers to do some things by themselves, it can negatively impact productivity. On the other hand, supportive office culture can motivate employees. A firm needs both financial and technological resources to produce quality goods and services.
The external business environment includes all factors that affect the firm from outside. These elements cannot be easily managed because they are beyond the firm’s control. The three external environmental factors that affect the firm include competitors, customers, and suppliers.
A firm will always face competition if the venture is profitable. The best way to deal with competition is to keep an eye on them. For example, if a competitor firm introduces a new product, the company should also launch an improved version of their item. On the other hand, customers will always change their tastes, and it’s up to the firm to keep up with those changes. Suppliers provide the business with inputs for production. If the market price for raw materials rises, the supplier will shift that cost to the business. When dealing with external environmental factors, businesses have to adapt to the changes to survive.