Types of Business Environment

Types of business are broadly two; one is internal business environment and other one is external business environment.

Internal business environment

All the factors inside a business including legal, financial, social, ethical, regulatory, managerial, administrative etc collectively develop internal business environment. Most of them are controllable and management easily manage them without any difficult or so much effort. However, their significance cannot be overlooked to run the affairs of business smoothly because if any of these factors turn negative it may impede the smooth functioning of the business.

Social environment of business comprises of entire social interaction within the organization; either it is formal or informal. Formal social interaction takes place in breaks of official meetings, weekly reviews, conference calls while informal social interaction is usually made during routine office hours in lunch breaks or tea breaks etc. Internally it is one of the important types of business environment.

Similarly ethical business environment covers ethical values a business upholds in doing business and mostly pertains to ethics and belief system of the society or country where such business operates. Likewise legal environment means the entire framework of law where a business has to operate and show its compliance at every stage.

Hence whatever is the type of business environment, one point must be clear that one can’t expect everything free in any of its type.

Managerial environment of a business pertains to entire managerial affairs of a business like surveillance of workers, monitoring of their performance, evaluation of their progress, motivating workers to work harder, managing their conflicts, offering incentives to achievers etc. Entire communication within management and with the workers is also part of this environment. Administrative environment of a business is also more or less same showing the administrative style of the business with particular reference to human resources. Managerial environment is also called life blood of internal environment which is one of key types of business environment.

Regulatory environment of business means the compliance of company to all regulations applicable to it by fulfilling all regulatory requirements to establish and then run a business following best corporate practices. Most of the corporations have fully fledged section to help abide by rules and regulations to avoid any kind of legal violation in day to day affairs of the business. Similarly financial environment of business shows the financial structure of the business. It means how a business fulfills its financial needs while establishing the business and how it manages its financing to run its affairs.

External environment of business

External environment of business comprises of all such factors which are mostly not controllable by the business or beyond its reach to control them as per its requirements. Most important of them are political and economic environments of business. Both of them are not under direct control of a business; even a slight change or modification can’t be made into it by any commercial entity whatever big it is.

Political environment of a country where a business operates has direct impact on it. Good political environment ensures business security and more and more businesses are established in such environment. On the other hand if this type of environment is not good or is uncertain or unpredictable then one doesn’t have confidence to expand one’s business there and would remain cautious to invest more. Therefore, business analysts stress upon the need to enable a congenial political environment in a country with stability in its policies and transparency in governance to attract more investment particularly foreign investment.

Economic environment of a business means how it utilizes its limited resources to make maximum production. There are four important variables in economic environment of business these are land, labor, capital and organization and are collectively called factors of production. Their best combination with skillful management takes the production level of a business to its optimum level and that is called ultimate success of any manufacturing concern.

All these components make the internal or external environments of the business which collectively are two types of business environment.

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Team Editorial

Team Editorial posts contents on this blog under the leadership of Edson Hale who is a pro blogger and widely acclaimed motivation consultant with twenty years experience of perception management on various issues of professional and personal development.

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