Internal and External factors in Business environment A business firm cannot operate in isolation. Business is affected by different factors which collectively form the business environment. To run the business successfully, it is necessary to understand the environment with in which the business operates. An organization has full control over these situations. PESTLE may also include technical. The microenvironment consists of seven larger parts: External factors are unpredictable and uncontrollable. It is equally plain that, on a global basis, growing and sustainable economies in the developing countries will provide the best opportunities for expanding markets. The study of internal factors is really important for the study of internal environment. The literal definition of an organization’s business environment includes a superset of both internal and external factors that influence the operations of a company on the ground in all the facilities it operates.

This is the environment that sets the tone of the company. Internal environment includes all those factors which influence business and which are present within the business itself. It includes factors such as integrity, ethical values, competence of the workers and the management’s philosophy about the way the organization operates. The Institute of Internal Auditors control environment definition states that the control environment is the “foundation on which an effective system of internal control is built and operated in an organization that strives to (1) achieve its strategic objectives, (2) provide reliable financial reporting to internal and external stakeholders, (3) operate its business efficiently and effectively, (4) comply with all … The business environment is challenging and the business needs to take governance and risk issues seriously to adapt and prepare itself for these challenges. Chapter 2 The Environment of Business 2.1 Multiple-Choice Questions 1) In terms of organizational boundaries and environments, which is correct?

Historically, Industries were set up in places where natural resources were available in abundance. Business environment is therefore, the total of all external forces, which affect the organization and the business operations (Kotler &Armstrong 2004). It includes elements such as management’s integrity and ethical values, operating philosophy and commitment to organizational competence. It is further classified into external micro and external macro environment. Definition: Business Environment means a collection of all individuals, entities and other factors, which may or may not be under the control of the organisation, but can affect its performance, profitability, growth and even survival. External Environment : The external environment is relatively watched compared to the internal business environment. Every business organisation operates in a distinctive environment, as it cannot exist in isolation. Business environment is the sum total of all external and internal factors that influence a business. Some of the various challenges that businesses have to face are as follows: The challenge of Globalization The challenge of Diversity are all relevant to business. Control Environment is the set of standards, processes, and structures that provide the basis for carrying out internal control across the organization. The study of internal factors is really important for the study of internal environment. Natural Environment: The natural environment comprising of ecological, geographical and topographical factors (such as natural resources, weather, climate, location etc.) The board of directors and senior management establish the tone at the top regarding the importance of internal control including expected standards of conduct. The control environment is the first interrelated component of internal controls.


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