Business Environment

I would say business environment is a marketing term that refers to factors and forces that affect a firm’s ability to build and maintain successful customer relationships.

There are two factors of the business environment.

  1. Internal Environmental Factors.

These are environmental factors that a company has control over them. This includes all departments, such as management, finance, research and development, purchasing, operations and accounting.

organization- dept

Each of these departments influences marketing decisions. For example, research and development have input as to the features a product can perform and accounting approves the financial side of marketing plans and budget in customer dissatisfaction.

Marketing managers must watch supply availability and other trends dealing with suppliers to ensure that product will be delivered to customers in the time frame required in order to maintain a strong customer relationship.

  1. External Environmental Factors.

These are environmental factors that a company has no control over them. Some of these factors include;

  • Macro-Economic Factors

These are factors that affect the entire economy not just your organization. Examples include things like interest rates, inflation, currency exchange rates, etc.

  • Micro-Economic Factors

These are factors that can affect your organization, such as distribution chain, market size, demand, supply, and the number and strength of your competition.

  • Technological Factors

Technology can either contribute to overall economic growth or hurt your business. Some technological innovations can increase your productivity and profit margins.


  • Political / Legal Environment

Legislation defines the regulatory environment within which both local and foreign firms must operate. These environments presents a firm with strategic opportunities as well as threats.

New regulations and deregulations may open new markets or the political environment can destabilize an industry.

  • Physical Environment

Special conditions such as extreme or cold temperatures or high humidity can offer the design of conventional products. Business can turn problems into opportunities such as by investing in research to find ways to save energy in heating or lighting. New energy sources such as windmill can exploit wind energy.



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