Define Internal Environment of Business?

A business can never be profitable if it is ignoring the dynamic internal and external environment. By examining the internal and external environment, an organization develops its long term objectives and then it chooses a particular strategic pathway to achieve those objectives. But this entire process can be completed only after a careful analysis of internal and external environment. Although it is an aspect of strategic management, but for the convenience lets discuss it under the subject of managerial environment.

Managerial Environment
A manager’s environment is actually made up of many factors that keep on changing on continues basis. These factors are both internal and external – that actually affect the overall operations of an organization. Managerial environment get affected with every change in internal and external factors, for example- If a new competitor enters in the marketplace, then the managerial environment is largely affected, similarly if key customers/clients take their businesses elsewhere then managers certainly feel the impact. Moreover, if some new technology enters into the industry then also the managerial environment feels the heat.

It true that the managers can’t always regulate or control their environments, so it’s always better to be aware of any changes that occur or that may occur, simply because these changes ultimately affect their daily day actions and decisions. For example, deregulation of the airline industry opened up the market to many new airlines in India, forcing the existing airlines to be more competitive than before. So, for the managers in the existing airlines it was not at all possible to ignore the increased service and cheaper airfares of competitors. If managers will not respond to this new competition in appropriate time, then this will turn lethal for their organization.

Internal Environment
Along with the external environment, internal environment of an organization also keep on changing. An organization’s internal environment is actually, composed of multiple elements existing within the organization, including management, current employees and most importantly corporate culture, which ultimately defines the employee behavior. Although few elements affect the organization as a whole and others affect only the manager and his/her operations. A manager’s leadership style or philosophical directly puts impacts upon the employees. Conventional managers give explicit instructions to their employees; on the other hand progressive managers empower their employees to make them capable of taking their own decisions. Changes in the leadership style or/and managerial philosophy put considerable impact upon the organization.

Various other dynamic components of internal environment are given below:
• Organizational mission statements
• Company policies
• Formal structures
• Organizational cultures
• Resources
• Managerial philosophies
• Managerial leadership styles

Category: Business, Business & Finance

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