Internal and External Environmental Factors that Affect a Business

Effective Communication in the WorkplaceChange is unavoidable. Every business goes through many changes. Sometimes, these are good changes while at other times they are not. These changes need to be met and accepted and the business should adjust to these changes. If the business does not do so, it is doomed to fail. Each change can affect the business in a negative or positive way. Changes can be within the business environment or outside the business environment. It is how these changes are handled that affects the business. This essay is about some internal and external environmental factors that affect a business. 

Some of the internal environmental factors that affect a business include management changes, employee morale, financial issues or changes and culture. A business can go through a significant change with a change in management. For example, employees may feel let down or disappointed if a manager changes. They will take time to get used to and adjust to the new one. This can affect the business. Similarly, employees that work hard will product better results than employees who don’t. The effectiveness and efficiency of the business will be affected by this factor. Similarly, the recruitment of new employees and their training also impacts the profits and productivity of a business. All these changes need to be considered and accepted and then, the environment should be adjusted to meet these changes. Structure is one internal factor that affects the day-to-day dealings of a business. Whatever the structure of the business, it has a significant impact on employees and the role they play in the business. Therefore, the structure of the business needs special attention.

External environmental factors are all the changes that occur outside the business but are beyond the control of those working in it. Government regulations, competition, recession etc. are some of these external environmental factors that affect a business. One of the most salient external environmental factors that affect a business is competition. Whether there are few or many competitors, the business needs to know who they are. Most often, a competitive analysis provides the business with an idea of the competition’s offerings and prices. Most often, strategic planners can anticipate and manage some of these external factors so that it does not take the business under.

Economics is an external environmental factor that affects a business. For example, customers’ ability to pay cash upfront for product and services, offered by the business, affects the bottom line of the business. The business may try many different methods, during hard economic times, to encourage customers to pay upfront. However, during hard economic times, the customers may prefer to save their money or use it in a different way. The business can prepare for this type of change, but it will suffer in the interim.

So many internal and external environmental factors affect a business. It is how these internal and external environmental factors are handled and managed that make the difference. If the business is not prepared to face the changes and make the necessary adjustments, it is doomed to failure.

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