Business Management is a disciplined effort to organize, analyze, and generate numerous styles of business operations. And if that sounds extremely general, that’s simply because any business is only looked at revenue generation and profit-making.
It is imperative to understand the impact of the environmental factors that play a crucial role in revenue generation too. Subsequently, having a healthy team environment help build the brand.
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 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.
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 Comparison||Internal Environment||External Environment|
|Nature||It is a Micro Environment||It is a Macro Environment|
|Influence||Influences directly and regularly||Influences indirectly and distantly|
|Elements||Competitors, shareholders and customers are the major elements||Economical, social and technological factors are the major elements|
|Point of control||It can be controlled by the internal factors||It has got no control over the outside factor that influence.|
|Effect on the groups||It affects specific groups||It 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 mission and vision provide a spotlight for an organization by encouraging its members to work together with its common goals. It keeps the people tagged to one particular mission.
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.
There are several ways to keep the internal environment in good harmony. It is to ensure that the people involved in holding the business are happy and satisfied with the growth.
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.
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:
- The business owners want their employees to have a perfect work-life balance.
- Customers demand satisfaction with the merchandise and services they buy and use.
- Suppliers need attentive communication, payment, and a robust operating relationship to supply required resources.
- The competition of the other companies with similar products.
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.
Most importantly, the external factors affect indirectly. It shows its venom only in the later stages of impact. 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. The external factors have a viral effect and as the name implies it spreads as fast as a supersonic. The outlook of the other side must not be perceived all the time.
It is an area to focus keenly. Many campaigns to keep the customer’s in good humour sets the tone for any business.
Main Differences Between Internal and External Environment
- 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.
- Internal factors are controllable but external environmental factors are uncontrollable.
- Internal environment factors are positive or negative for the organization but External factors give a chance but majorly pose threats.
- Any small changes done in the Internal environment affects the company itself but a change in the external factor affects the lot associated with it.
- With the support of the management, Internal environment can see a considerable growth but this will not work out in the case of latter.
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.
Therefore, examining internal and external factors regularly is a viable option for successful business operations. Indeed success lies in collaboration, and the collaboration is in both of these factors.
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.
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