Types of business environment

 Business environment can be defined as the forces in the external as well internal working area of the business that impacts either positively or negatively on the functioning of the business. The environment in the business plays a major role in the good performance of the business. In the case of negative business environment, there is need that the business owner should consider in order to improve the business environment.

It is the business environment that provide the business with both the threats as well as several opportunities. A good working business environment is required in order to get as more chances and thus help the business to grow at fast rates. In order to improve the business environment, one should know the types of business environment. Following guide will help you understand different category of business environment.

There are two types of business environment

Primarily business environment is classified in two categories. These are:

  1. Internal business environment
  2. External business environment

Internal business environment

As in name, the internal business environment can be defined as the internal forces present inside the organization that impact either negatively or positively on the functioning of the business. The internal environment of the business comprises of all the human as well as physical assets, marketing as well as financial resources, the management, technical supports and many more that lies inside the business.

With financial resources, we mean the financial capability of the business and the physical resources includes all the assets, machinery, building, production plants, etc that plays major role in converting the input into the output.

Another crucial part of the internal business environment is human resources or the staff that are engaged in different kind of organizational activities. The management of the production, marketing, and others are done with the help of human resources and they are responsible for the creation of both the positive as well as the negative internal business environment. The technical assets include the machinery and technologies which are responsible for the production of the goods as well as the service.  

Most of the factors or the forces that constitutes the internal business environment are controllable and can be manipulated as per the convenience in order to maintain the positive business internal environment and as according the changes in the external business environment. 

External environment

As mentioned in the name, the external environment constitutes of the forces from the external sources that impacts either negatively or positively the business functionality and their performances. Most of the factors responsible for the external environment of the business are uncontrollable can they can create either opportunity or the threat for the business. The external business environment are further classified as:

  1. External micro business environment
  2. External macro business environment  

External micro business environment

The external micro environment are the forces that impacts majorly on the functionality of the business. There are several factors that constitute the micro external environment of the business. For example, the suppliers plays major role in deciding the price of the product. The essential factors that constitutes the micro external environment of the business are as follows:

Suppliers of input

They are major factors that plays a major role in deciding the price of the product or the service. The suppliers of the input constitutes the major external environment of the business which comprises of the raw material and the components required for the manufacturing of the final product or the service. In order to work smoothly, the organization needs the constant and regular suppky of the inputs, and other raw materials.

Also, the supply of the product should be done at the reasonable price. In the case when the raw material is very expensive, this will increase the final cost of the product. And, thus the customer ill need to bear the extra price of the product. In the case when the transportation of the raw material is expensive, it will also increased the final price for the customers.

This is why, many of the companies  are now moving toward setting up their own plant for the raw material. Likewise, energy is also important for the production or the manufacturing of the product. The increase or decrease in the cost of energy will also impact on the final price of the product.  

Customer

Customers are those who purchases the products or the service in exchange of money and thus are major factor contributing in the creation of micro external business environment. Customers are the major factor of the business external micro environment that decides the profit or the loss of the business.

Marketing middle man

Marketing middle man or the intermediaries are also important part of the external business environment that helps the company in selling the product or the services.

Competition

Now the concept of monopoly has been vanished from the market. This leads the competition to be the major factor to decide the external micro environment of the business. Now all the businesses need to compete in the market not only for the customers but for many more factors as well.

External macro business environment

These are external forces that are faced by the complete particular industry and are reason for the creation of opportunities as well as threat. The external macro business environments are:

Economic environment

The economy is a major forces for the creation of external environment of the business. They can be of different phase including the growth phase of the economy or the decline phase and are having impact in the functionality of the business.

Social and cultural environment

The culture and the social environment around the business impacts majorly on the customer behavior and thus their buying tendency. For example, the meat business will not work well in the area with more Hindu peoples.    

Political and legal environment

All the business are having some of the relationship with the government . And, the changes in the laws can have either the positive or negative impact on the business.

The bottom line

So these are types of business environment1