Business Environment: Analysis of Internal and External Factors and Their Impact on a Business Entity

This article discusses the importance of analyzing the business environment, both internal and external, for achieving organizational goals. It provides a brief analysis of different internal and external environmental factors and their influence on a business entity, using Tesco as an example. It also explores several ways in which a business can impact the external environment that is present outside a business organization.

Business
environment

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
LO3..................................................................................................................................................3
A brief analysis of different internal and external environmental factors and their influence on
a business entity...........................................................................................................................3
LO4..................................................................................................................................................5
Several ways in which a business can impact on external environment that is present outside a
business organisation...................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business environment is the composition of different elements and factors that are
associated with functioning of a business at the marketplace. It is very much important for the
management to analyse business environment in a precise manner to achieve different
organisational goals and objectives (Akhtar, 2018). It is necessary for a business entity to focus
on both external and internal environment for majorly dealing with different organisational
situation. The risk associated with the operations of a business is also determined with the help
of external and internal environment of a business. A business organisation must take help of
professional strategic management in order to predict impact of external business environment.
In this project there is a brief explanation given about external and internal environment of a
business. In this project example of Tesco is taken into consideration for better understanding
marketing operations. Tesco is a multinational retail company which was founded in the year
1919 and it deals in selling quality retail products in the global market.
MAIN BODY
LO3
A brief analysis of different internal and external environmental factors and their influence on a
business entity
External environment analysis
It is the major responsibility of management which is working for Tesco to analyse external
business environment with help of PEST analysis. The PEST analysis of Tesco is mentioned
below:
 Political factors- These factors are related to rules and regulations which are formulated
by the government of concerned country. Tesco is majorly impacted by stability and
instability of government in different countries. The company must take support of
human resource management for achieving professional employee management in order
to develop business operations (Gaganis, 2019).
 Economical factors- Tesco is mainly affected by different factors that are present in the
economy of economic nature. The monetary policy which is developed by the
government impact on several financial aspects of the business. It is the major

responsibility of financial management to focus on different economic factors for overall
development of a business.
 Social factors- Culture are main part of social factors that determines organisational
culture and its components. The human resource management of Tesco should formulate
effective strategy in order to deal with different social factors. It is ethical responsibility
of professional management which is working for the company to follow different
traditional techniques of employee management. The business organisation should also
perform corporate social responsibility in order to facilitate development of whole
society.
 Technological factors- - In the external factors which are present in the economy it is
essential for a business to apply use of information and technology. Most of successful
business organisations at the marketplace are involved in usage of information and
technology in order to compete at the marketplace. Tesco generally develops critical
approach at the marketplace in order to apply different types of technology related
operations. In the era of stiff competition, there are various factors which are related to
the information and technology impacts the functioning of Tesco.
Internal environment analysis
In order to analyse internal environment of the business it is essential to take support of
SWOT analysis. The SWOT analysis of Tesco is mentioned below:
 Strengths- In the global and domestic market marketing department and its functions are
the major strength of the company (Hamilton, 2018). The marketing department is
helpful in increasing revenue of the company and is also supportive in attracting large
number of customers from the marketplace.
 Weaknesses- The weaknesses are major drawbacks of a business which brings
inefficiency in business operations. Managing bulk operations in a precise manner in
international market is major weakness of Tesco. Tesco has hired skilled and trained
employees for business development and to manage bulky operations.
 Opportunities- Expansion of business operations and functions in international market is
the major opportunity available to Tesco. Management of Tesco should take help of
professional strategic management for expanding operations in the market.

 Threats- Different giant global retail companies are planning to expand their operations
at the marketplace with huge investment. This is a major challenge and threat for Tesco
in order to expand its business operations.
LO4
Several ways in which a business can impact on external environment that is present outside a
business organisation
Major business organisations at the marketplace affect on different aspects of external
environment to lead the marketplace. In order to gain competency edge in business operations
and functions it is compulsory for a business entity to deploy strategic management. A business
organisation impacts in different economic factors that are present in economy of a country. A
company also creates a big influence on environment. Tesco follow environment related policy
of the government in order to perform sustainable business operations that are beneficial for
future generations (Khajeheian, 2018). The culture which is maintained domestically and
internationally by Tesco also helps in development of social condition of country. The corporate
social responsibility which is performed by a business organisation is also helpful in
development of different sections of society. An organisation also follows different laws and acts
that are part of legal structure of the country. Tesco also impact different technological factors by
using technology in business.

CONCLUSION
From the above discussion it can be concluded that business environment directly affects in
profitability and efficiency of the company. It is the major responsibility of strategic
management of a company to predict whole internal and external environment in order to
develop business in overall manner. It is important for an organisation to specially focus on
political and economical factors that are present in macro environment to facilitate achievement
of different aims and objectives. This project also concludes that is duty of human resource
management which is working in the organisation to develop and maintain external and internal
culture of the business in precise manner for business development.

REFERENCES
Books and Journals
Akhtar, M. and Sushil, S., 2018. Strategic performance management system in uncertain
business environment: An empirical study of the Indian oil industry. Business Process
Management Journal.
Gaganis, C., Pasiouras, F. and Voulgari, F., 2019. Culture, business environment and SMEs'
profitability: Evidence from European Countries. Economic Modelling, 78, pp.275-292.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Khajeheian, D., Friedrichsen, M. and Mödinger, W., 2018. An introduction to competitiveness in
fast changing business environment. In Competitiveness in emerging markets (pp. 3-11).
Springer, Cham.