Difference Between Internal and External Environment

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


Business Quiz

Test your knowledge about topics related to business

1 / 10

Who takes no active part in Business?

2 / 10

Small scale firms are ____________ flexible in their functioning.

3 / 10

A firm which outsources its works requires ___________.

4 / 10

_________ is an important consideration for setting up an office.

5 / 10

A Company is called an artificial person because _________.

6 / 10

A partner in a firm _____.

7 / 10

Importing goods for the purpose of re-export is termed as ___________.

8 / 10

Wages and taxes that a company pays are examples of:

9 / 10

The six Ps are collectively known as the Marketing Mix. They are ways in which organisations differentiate themselves. They include

10 / 10

Overall and strategic planning is done by the ___________.

Your score is


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

Key Takeaways

  1. The internal environment includes factors that affect its operations, such as employees, management, and company culture.
  2. The external environment comprises factors outside the organization that can impact its success, including competitors, regulations, and economic conditions.
  3. Organizations must adapt and respond to internal and external environments to maintain competitiveness and achieve long-term success.

Internal vs External Environment

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

Internal vs External environment

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


Comparison Table

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 primary elementsEconomic, social and technological factors are the primary elements
Point of ControlInternal factors can control itIt has got no control over the outside factor that influence it.
Effect on the groupsIt affects specific groupsIt affects common groups


What is Internal Environment?

An Internal environment of any business denotes the company’s employees consisting of the management and direct and indirect staff members.

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

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

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

The internal environment is like a foundation stone; it must be robust, 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. 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 laws are many samples of political and legal problems that will affect how 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. Maintaining an excellent external relationship is an important reason for many businesses to flourish in this digital world.

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

external environment

Main Differences Between Internal and External Environments

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