Factors Influencing Business Environment


Meaning of business environment

It refers to the area where the business exists. It consists of several factors which affect the functioning of the business. These all are responsible for the success & failure of any business. These factors affect the threats & challenges of business. Factors Influencing Business Environment may be internal or external to the business environment. Some of these are under control of the business while some are not. These factors need to understand by every business for its success.

Internal and External Factors Affecting Business Environment

Internal factors

These are those which are under control of business. They all are internal part of business. They all affect the weakness and strength of the business. Some of the internal factors are:

Employees Management

Performance of workers affects working of company. They all are responsible for the success and failure of the business. All employees should be managed and monitored. Managers should guide them towards company’s goals.

Financial capacity

Finance is one important factor for running business. Money affects the success and failure of every business. Business carries its area of operations according to its budget. So, its finance should be proper to carry on its required operations.

Business culture

It refers to the ethics & morals followed in business. This is important for the proper functioning of business. Every employee is given chance to participate in decision-making. All top managers and every employee should take decision together.

Structure of the business

It refers to the composition of management team of company. This composition should be proper containing enough members.  It affects the decision-making for the business. If, composition is proper then the quick decision can be taken. Delay in decision-making may affects the performance of business.

External Factors

These factors are external to the business. They do not come under the control of business. External factors need to monitor every time. They influence the working of the business. Some of external factors are:

Market competition

It refers to existence of other business in market giving competition. Every business needs to face the tough competition in the market. It needs to bring some kind of uniqueness in its products & services. Efficiency in business helps in beating competition in the market. It helps in providing quality goods at low cost.

Rules & regulations of Government

Every business needs to follow some principles for its operations. These operations affect the functioning of the business. Rules are different for different business. For some they are strict and for some they are light. For example. The tobacco industry has strict rules to follow. It is hard for them to serve their customers.

Existence of supplier & your Customers

Supplier affects the performance of the business. Non-timely supply of materials will affect business operation. Supplier affects the cost of business. So existence of cheap & the best supplier is good for business. Availability of enough customers affects business. If, you have more customers you will more profit & large operations. So, business should try to face competition to attract more & more customers.

Advertising & media

It refers to level of awareness about business in market. If, no information regarding business to customers then business can’t run. So, business should try its best to create awareness among large number of people. Proper channels of media should be selected to cover large area. This factor has direct influence on the business.

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