Difference Between Internal and External Environment

Business Management is a disciplined effort to organize, analyze, and generate numerous styles of business operations.

Effective business management requires two massive factors to be balanced. One is the Internal Environment and the other is the External Environment.

Internal vs External Environment

The main difference between Internal and External environment is the impact both of them create in the business, the internal environment is the root of the organisation’s branding, as it affects directly while the external environment has its effect indirectly on the organisation’s growth.

Internal vs External environment

It is to be understood that, Internal Environment has certain factors that are directly associated with the company’s growth in the market and External has multiple factors that are directly and indirectly associated with the growth or decline of the whole organisation.


 

Comparison Table Between Internal and External Environment (in Tabular Form)

Parameter of ComparisonInternal EnvironmentExternal Environment
NatureIt is a Micro EnvironmentIt is a Macro Environment
InfluenceInfluences directly and regularlyInfluences indirectly and distantly
ElementsCompetitors, shareholders and customers are the major elementsEconomical, social and technological factors are the major elements
Point of controlIt can be controlled by the internal factorsIt has got no control over the outside factor that influence.
Effect on the groupsIt affects specific groupsIt affects common groups

 

What is Internal Environment?

An Internal environment of any business denotes the employees of the company that consists of the management and also direct and indirect staff members.

The formal structure of a company is that of the ranked organization of jobs and communities. The core values of the companies differ from one another and it always is the driving factor for their success.

Most companies are looking at motivating the employees to seek better result. The excellent output is always guaranteed when the internal customers are happy and content.

The motivation can be intrinsic or extrinsic but plays a major role in business. Be it the stocks’ value or the brand image, the internal environment must be always healthy to portray a grand show in the public.

The internal environment is exactly like a foundation stone, it must be strong, healthy and enthusiastic. This has a direct impact on the organisation’s growth or decline.

internal environment
 

What is External Environment?

All outside factors that will affect a company are the external environment. The environmental aspect is explained through examples mentioned below:

  1. The business owners want their employees to have a perfect work-life balance.
  2. Customers demand satisfaction with the merchandise and services they buy and use.

The external environment’s other form is the peripheral forces. Tax policies, trade laws, and earnings law are many samples of political and legal problems that will have an effect on the manner a company operates.

The companies invest a lot in understanding the external environmental factors that affect the market. Subsequently, the investment is also made appropriately to have a corrective action plan.

The factors involved in the External Environment are uncontrollable. In this digital world, maintaining a good external relationship is a vital reason for many businesses to flourish.

It is an area to focus keenly. Many campaigns to keep the customer’s in good humour sets the tone for any business.

external environment

Main Differences Between Internal and External Environment

  1. The main difference between the Internal Environment and External Environment is Former has factors, events, conditions that exist within the organisation and can influence the company’s choices and functions. But, the latter has factors that don’t exist within but will affect the company’s operations, decisions, survival, and growth.
  2. Internal factors are controllable but external environmental factors are uncontrollable.

 

Conclusion

The success of a company depends on many factors, and they can be brought under two important brackets; internal and external. It is of prime importance to watch out for the external and internal cues of disaster all the time.

The company or the organization will have to work in hand with both the Internal Environment factors and the External Environment factors and have to work on the areas of the improvement that will help the company to excel in the business.


References

  1. https://libres.uncg.edu/ir/uncg/f/R_Sarala_Knowledge_2008.pdf
  2. https://journals.sagepub.com/doi/abs/10.1177/014920638701300406
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