Difference Between Internal And External Business Environment

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The internal business environment includes factors within the organisation that impact the approach and success of the business operations. Formerly presented as core competencies, capabilities, leadership style and culture of an organisation. To understand its sources of competitive advantage from within a firm or an organisation will implement specific tools such as SWOT analysis (Strength, Weaknesses Opportunities and Threats), Value chain analysis, Resource based view, VRIO framework and BCG Matrix for instance. The same applies to the external business environment where Porter’s five forces framework, SWOT analysis and PESTEL come handy. The management of a company usually formulates the mission and objectives of that company based on its available resources, capabilities and core competencies. While doing this internal analysis, management can identify how the strengths of that company can assist in achieving its goals and how its weaknesses may hamper them.…show more content…
As the name suggests, “internal” business environment refers to internal factors and resources that affect the running of the business. This primarily includes the workforce where the employees play a vital role in affecting company’s performance. If a company has well trained or motivated employees, that company is likely to get good output from them. However, if the same company recruits unmotivated employees who do not perform well or dig in their heels when a new plan arrived, this will affect that company’s production levels and ultimately hinder its profitability. Another factor to consider is all the capabilities that a company possesses. The tool used to monitor them is the resource based
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