Types of Business Environment

There are two broad types of business environment :

1. Internal Environment, and
2. External Environment.

Internal environment refers to all the factors existing within a business firm. The internal factors are considered controllable because the enterprise has control over these factors. For example, a company can modify or alter its organization structure, policies and programmes, personnel, physical facilities and marketing structure, policies and programmes, personnel, physical facilities and marketing mix to suit the changes in the environment. However, an enterprise may not imparts strengths or causes weaknesses. A strength is an inherent capability of an interprise which can be used to gain strategic advantage over its competitors. On the other hand, weakness means an inherent limitation or constraint of an enterprise which creates a strategic disadvantage.

The external environment consist of forces and factors outside an enterprise. The external forces are by and large beyond the control of a firm and are, therefore, regarded as uncontrollable. For example, a company has almost no control over national income, social forces, government policies, population, etc. However, sometimes a powerful corporation may be able to change some external factors. External environment creates opportunities and threats for an enterprise. An opportunity is a favourable condition whereas a threat is an unfavourable condition in the external environment.