Two 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 collectively develops internal business environment. These factors are legal, financial, social, ethical, regulatory, managerial, administrative etc . Most of them are controllable. Management easily manage them without any difficult or so much effort. Their significance cannot be overlooked to run the affairs of business smoothly. 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. Informal social interaction is usually made during 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. It mostly pertains to ethics and belief system of the society or country where such business operates. Legal environment means the entire framework of law. Business has to operate within it. It has to show its legal compliance at every stage.
Whatever is the type of business environment one point must be clear. One can’t expect everything free in any of its type.
Managerial environment of a business pertains to entire managerial affairs of a business. It includes surveillance of workers, monitoring of their performance, evaluation of their progress. It also covers 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. It reflects the administrative style of the business with particular reference to human resources. Managerial environment is also called life blood of internal environment. It is one of the key types of business environment.
Regulatory environment of business means the compliance of company to all regulations applicable to it. A company fulfills all regulatory requirements to establish. It then runs its business following best corporate practices. Most of the corporations have fully fledged section to help abide by rules and regulations. Their aim is to avoid any kind of legal violation in day-to-day affairs of the business. Financial environment of business shows the financial structure of the business. It means how a business meets its financial needs. And how it manages its financing to run its affairs.
External environment of business
External environment of business comprises of all the factors that 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 howsoever big it is.
Political environment of a country has direct impact on external business environment. Good political environment ensures business security. More and more businesses are established in congenial environment. On the other hand if this type of environment is not good, it does not support growth. Investors remain cautious to invest more. Business analysts stress upon the need to enable a congenial political environment in a country. They advise stability in its policies and transparency in governance. It is good to attract more investment particularly foreign investment.
Economic environment of a business means how it utilizes its limited resources to make huge production. There are four important variables in economic environment of business. These are land, labor, capital and organization. They are collectively called factors of production. Their best combination with skillful management takes the production level of a business to its optimum level. It is called ultimate success of any manufacturing concern.
All these components make the internal or external environments of the business. They are two types of business environment.
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