The business environment provides the source of business idea through changes in industry, market, technology etc.
The term “environment” is used to refer to the surroundings and conditions in which we live, which affect the way we live. For example, there are natural factors such as air, water, rain and seasons etc. which affect the way we live and do things. There are also things that are not natural which also effect the way we live such as actions of governments, economic conditions, moral values etc. which affect the way we live. The same applies to a business.
The environment in which a business operate is usually divided into three categories namely; macro, micro and internal factors as depicted in the picture above.
The Macro Environment
The macro environment are the conditions that exist in the global economy or markets that affect the operations of a business. They are usually evaluated using the acronym PESTEL which stands for “Political”, “Economic”, “Social”, “Technological”, “Environmental” and “Legal” factors. The macro conditions affect businesses today more than ever before as globalisation allows what happens in one country or region to affect others.
The Micro Environment
These are conditions in the immediate surroundings that affect its operations. In includes the suppliers, competitors, Marketing intermediaries, customers, pressure groups and the general public.
The internal environment
Internal environmental factors are events that occur within an organisation. Generally speaking, internal environmental factors are easier to control than external environmental factors. Some examples of internal environmental factors are as follows:
- Management changes
- Employee morale
- Culture changes
- Vision
- Mission
As it can be seen from the diagram above, many things within the immediate and external environment affect a business. This relationship continues until the business is discontinued, but as long as a business is in existence, there are a lot of factors in the environment to contend with. Moreover, we live in a period of constant change because of technological advancement where products and services are frequently made obsolete as new ones emerge. Consequently, monitoring the business environment is only a source of business idea but a vital and continuous task for any business if it is to continue to survive.