These are the broad categories of internal and external factors in the environment of a business that influences the actions and operations of the business organization.
This is otherwise known as MICRO ENVIRONMENT, TASK OR OPERATING ENVIRONMENT, direct business environment is the immediate periphery of the business that has a continuous and direct impact on the business. These refers to those elements of the external environment that have direct implications for the successful operations of the firm. For example, the behaviour of a firm’s customers, bankers and suppliers have immediate and direct effect on the operations of the firm. Elements or factors of this nature are said to belong to the direct-action component of the external environment. The components of the direct external business environment includes SUPPLIERS, CUSTOMERS,COMPETITORS,GOVERNMENT AGENCIES, SPECIAL INTEREST GROUP, COMMUNITY IN WHICH THE BUSINESS IS SITUATED.
The indirect environment is otherwise known as MACRO ENVIRONMENT OR GENERAL ENVIRONMENT, indirect business environment consists of factors or forces that have a general influence on the operations of the firm. These factors or forces are common to all the firms in the economy. While each firm in the society must understand the nature of, and the changes occurring in the indirect-action environment, such changes apply to every firm operating in the economy. Elements of the indirect External business environment are classified into political, economic, socio-cultural, technological, legal/public policy environment, and international environment. This can be coded as the PESTELI indirect external business environment.
There are two broad components of the business environment. The internal and external business environment.
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- INTERNAL ENVIRONMENT: The factors which exist within the organization, imparting strength or causing weakness to the organization, comes under internal environment. It includes: Value System, Vision and Mission, corporate Objectives, Corporate Culture and Human Resources.
- EXTERNAL ENVIRONMENT: External Environment consists of those factors which provide an opportunity or pose threats to the business. It is further classified as direct and indirect environment.