INTERNAL ENVIRONMENTAL ANALYSIS INTRODUCTION: Business decisions are influenced by two sets of factors Internal factors (The Internal

l Environment External Factors( The External Environment) Business Environment presents two challenges to the enterprise The challenge to combat the environmental threats Exploit the business opportunities Environmental Analysis is one of the first steps in Strategic Management TYPES OF ENVIRONMENT 1) INTERNAL ENVIRONMENT 2) EXTERNAL ENVIRONMENT

Important internal factors are 1) Value System The value system of founders and those at the helm of affairs has important bearing on the choice of business, the mission and objectives of the organization, business policies and practices. 2) Mission and Objectives The business domain of the company , priorities , direction of development, business philosophy, business policy etc. are guided by the mission and objectives of the company

3) Management Structure and Nature

The organizational structure, the composition of the Board of Directors, extent of professionalization of management etc. are important factors influencing business decisions. 4) Internal Power Relationship Factors like the amount of support the top management enjoys from lower levels and workers, share holders and Board of Directors have important influence on the decisions and their implementation. The relationship between the members of Board of Directors is also a critical factor. ) Human Resources The characteristics of the human resources like skill, quality, morale, commitment, attitudes etc. could contribute to the strength and weakness of the organization. The involvement, initiative etc. of the people at different levels may vary from organization to organization. 6) Company Image and Brand Equity The image of the company matters while raising finance, forming joint ventures or other alliances, soliciting market intermediaries, entering purchase or sale contracts , launching new products etc. OTHER FACTORS 1. Physical Assets and Facilities 2. R&D and Technological Capabilities 3. Marketing Resources 4. Financial Factors 5. ntroduction to Business Environment 6. The formula for business success requires two elements - the individual and theenvironment. Remove either value and success becomes impossible. Businessenvironment consist of all those factors that have a bearing on the business. The term'business environment implies those external forces, factors and institutions that are beyond the control of individual business organisations and their management and affectthe business enterprise. It implies all external forces within which a business enterpriseoperates. Business environment influence the functioning of the business system. Thus, business environment may be defined as all those conditions and forces which areexternal to the business and are beyond the individual business unit, but it operates withinit. These forces are customer, creditors, competitors, government, socio-culturalorganisations, political parties national and international organisations

etc. some of thoseforces affect the business directly which some others have indirect effect on the business. 7. Features of business environment 8. T o t a l i t y o f e x t e r n a l f o r c e s : B u s i n e s s e n v i r o n m e n t i s t h e s u m t o t a l o f a l l t h i n g s external to business firms and, as such, is aggregative in nature. S p e c i f i c a n d g e n e r a l f o r c e s : B u s i n e s s e n v i r o n m e n t i n c l u d e s b o t h s p e c i f i c a n d general forces. Specific forces affect individual enterprises directly and immediately intheir day-to-day working. General forces have impact on all business enterprises andthus may affect an individual firm only indirectly. D y n a m i c n a t u r e : B u s i n e s s e n v i r o n m e n t i s d y n a m i c i n t h a t i t k e e p s o n c h a n g i n g whether in terms of technological improvement, shifts in consumer preferences or entryof new competition in the market. 9. 10. 11. U n c e r t a i n t y : B u s i n e s s e n v i r o n m e n t i s l a r g e l y u n c e r t a i n a s i t i s v e r y d i f f i c u l t t o predict future happenings, especially when environment changes are taking place toofrequently as in the case of information technology or fashion industries. R e l a t i v i t y : B u s i n e s s e n v i r o n m e n t i s a r e l a t i v e c o n c e p t s i n c e i t d i f f e r s f r o m country to country and even region to region. Political conditions in the USA, for instance, differ from those in China or Pakistan. Similarly, demand for sarees may befairly high in India whereas it may be almost non-existent in France. 12. TYPES OF ENVIRONMENT 13. On the basis of the extent of intimacy with the firm , the environmental factors may beclassified into different types-internal and external. 14. INTERNAL ENVIRONMENT 15. The internal environment is the environment that has a direct impact on the business.Here there are some internal factors which are generally controllable because thecompany has control over these factors. It can alter or modify such factors as its personnel, physical facilities, and organization and functional means, like marketing, tosuit the environment.The important internal factors which have a bearing on the strategy andother decisions of internal organization are discussed below. 16. Value system 17. The value system of the founders and those at the helm of affairs hasimportant bearing on the choice of business, the mission and the objectives of theorganization, business policies and practices. 18. Mission and vision and objectives 19. Vision means the ability to think about the future with imagination and wisdom. Vision isan important factor in achieving the objectives of the organization. The mission is themedium through which the objectives are achieved. 20. 21. 22. Management structure and nature 23. The structure of the organization also influences the business decisions. Theorganizational structure like the composition of board of directors , influences thedecisions of business as they are internal factors . The structure and style of

theorganization may delay a decision making or some other helps in making quick decisions. 24. Internal power relationships 25. The relationship among the three levels of the organization also influences on the business. The mutual co-ordination among those three is a an important need for a business. The relationship among the people working in the three levels of theorganization should be cordial. 26. Human resource 27. The human resource is the important factor for any organization as it contributes to thestrength and weakness of any organization . the human resource in any organization musthave characteristics like skills, quality, high morale, commitment towards the work ,attitude, etc. T he involvement and initiative of the people in an organization at differentlevels may vary from organization to organization. The organizational culture and overallenvironment have bearing on them. 28. Company image and brand equity 29. The image of the company in the outside market has the impact on theinternal environment of the company. It helps in raising the finance , making jointventures , other alliances, expansions and acquisitions , entering sale and purchasecontracts , launching new products, etc. Brand equity also helps the company in sameway. 30.