Internal Environment in Marketing: Meaning, Factors and Importance


Meaning of Internal Environment

Internal environment in the market refers to a component of the business environment which is composed of factors lying within the organization. It is one which is unique and internal to business including everything lying within its boundaries. The internal marketing environment is also termed as a controllable environment as it comes directly under the control of firm. This environment gets affected by decision, activities and choices of business organization. The internal environment on the other hand is also capable of influencing the organizational decisions and behaviour of human resources working within it. It encompasses member, machine, equipments, work and work processes, reward structure, culture, climate, management team and their practices. Members, here includes one which are either directly or indirectly associated with the firm like owners, employees, shareholders, board of directors, managing directors and many more like this.

The internal environment plays an effective role in creating, communicating and delivering market offerings by firm no matter whether they are tangible or intangible. Business generally figures out and group their internal environment into their strengths and weaknesses. Strength are those factors which brings positive effect to company. Whereas, weakness indicate all such factors which bring in negative effects and prevent the growth of company. 

Factors influencing the Internal marketing environment

There are factors which comes directly under the business control but influence its strategies and other decision making that are listed below: –

  1. Vision, mission and objectives: A vision of company denotes the position where it wants to achieve in future period of time. The company’s business and reason for its functioning in market is denoted by mission. Whereas, the objectives denote ultimate aims of firm and means to attain them in a timely manner. 
  2. Value system: The value system denotes each of those elements which form the part of regulatory framework of business organization. It includes work processes, norms, culture, climate and management practices of organization. Every employee should perform their assigned tasks within this framework’s purview.  
  3. Corporate culture: Corporate culture is also termed as organizational culture which relates to values, behaviour and belief of the business enterprise. This culture reflects the manner in which communication in between management and employees should take place and also the way in which external affairs should be managed.   
  4. Organizational structure: Organizational structure defines the pattern or sequence in which all activities should be carried out within the business for reaching the final goals. The structure is composed of task delegation, coordination, level of professionalization and supervision, and board of director’s composition. Functional structure, divisional structure, bureaucratic structure, matrix structure etc. are various form of organizational structures. 
  5. Physical resources and technological capabilities: The tangible assets within the business enterprise used in carrying out its scale of operations are called physical resources. These resources determine the competitive capability of a firm. Whereas, the technological capabilities relate to the technical know-how of firm. 
  6. Human resources: Human resources is the key asset of every organization which influences their success or failure rate. They facilitate business in reaching their goals efficiently and within stipulated time period. 
  7. Finance: The scale or scope of marketing activities performed by business organization are directly influenced by its financial position. Profitability, liquidity and cash flow determines the amount of funds available at business disposal for investment in marketing and promotional campaigns. 
  8. Firm’s goodwill: Goodwill of a firm defines the reputation of business in market which is a valuable intangible asset. A company is able to build a favorable image in minds of people if it enjoys high reputation and goodwill in market. Organization may fail to attract customers in presence of high competition in case if its image in market is negative. 
  9. Labor unions: Labor union is another key determinant of internal environment of every business firm. Union means group formation of all employees working within that is represented by union leader. The leader bargain collectively on behalf of all labors with management team with regard to wages, leave and working conditions for each class of employee. Good relations in between the management and union are must in order to ensure smooth functioning of business enterprise. An organization must motivate its employees to come forward and participate in decision making.

Importance of Internal marketing environment

The role played by internal environment in functioning of business enterprises are well-discussed as given below: – 

  1. Recognizes opportunities and threats: The key role played by marketing environment is that it facilitates business in identifying the ongoing changes around it. Every change is not negative or harmful for business but can lead to its success if are evaluated and understood timely. These changes should be properly considered for knowing what all are the opportunities and threats for organization associated with them. Business should utilize them as a tool for solving their problems. 
  2. Directs toward growth: Internal marketing environment gives direction to organization for attaining the desired level of growth. It tells those areas which possess more scope for growth and expansion of business activities. This key a company can focus more on the profitable activities in place of less demandable or less profitable activities.
  3. Coping with changes: Marketing environment enables business in knowing the market variations such as technological changes, emerging trends, changes in customer requirements and new polices of government. Every firm need to be aware of these changes in order to deal with them in an efficient manner.  
  4. Builds image: A business displaying a sensitivity towards its environment can easily enhance its image to a greater extend. In addition to this, business must also develop a proper understanding of environment around it. For example, there are instances where there may be power shortage in an area where factory operates, for overcoming the issue a captive power plants is set up for fulfilling their power requirements which proves to be beneficial for society as well.   
  5. Continuous learning: Marketing environment provides a continuous platform of learning to business as it is dynamic in nature. The environment keeps on changing very frequently which motivates managers and employees in keeping themselves up to date in terms of skills and knowledge. All this result in making business prepared for the predicted as well as unpredicted changes taking place.  
  6. Meeting competition: It facilitates business in meeting the competition level in market by making them aware of the actions and strategies used by competitors. This way organization can develop better strategies for themselves by considering their competitor’s actions and activities.   
  7. Assist in tapping useful resources: Business enterprises are more efficiently able to tap their useful set of resources by scanning their environment. Once these resources are tracked then they can be transformed into useful goods and services.