Internal and External Environments of a Business and the Government and Market Economy

INTERNAL AND EXTERNAL ENVIRONMENTS AND THE GOVERNMENT AND THE MARKET ECONOMY

MID-MODULE ASSIGNMENT 1

CONTENTS

INTRODUCTION

Page

3

EXTERNAL AND INTERNAL ENVIRONMENT

Page

4 - 6

GOVERNMENT INTERVENTION IN THE MARKET ECONOMY

Page

7 - 9

CONCLUSION

Page

10

REFERENCES

Page

11

INTRODUCTION

During this report there are a number of areas which will be discussed. The report will begin by looking at the internal and external environments by looking at what these mean to a business and the advantages and the disadvantages to each environment and why they are important to an organisation, along with the impact the internal environment have on an organisation generally and how its imperative not to ignore the internal environment.

This report will also assess ‘how the government intervention in a market economy and why it is necessary for the government to intervene sometimes to help balance out issues within the economy. But what the advantages and the disadvantages of the government’s intervention.

EXTERNAL AND INTERNAL ENVIRONMENTS

INTERNAL ENVIRONMENTS

The internal environment of an organisation is referring to the following: -

Plans and policies

Value preposition

Human resource

Financial and marketing resource

Corporate image and brand equity

Physical assets

Labour management

Inter-personal relationships with employees

Internal technology

Organisational structure

Quality and size of infrastructure

Financial forecast

Decision-making power

Although some of the internal environment affects the employees but mainly it’s the manager who is affected due to the employee’s direct leadership style has an impact on the employees. It is traditionally expected that the manager would supply clear instructions on what is expected to be done by the employees, however, or more progressive manager may encourage other employees to make their own decisions.

As discussed in ‘The organisation’s internal environment and its importance in the organisation’s development’. The organisation can be a complex socio-economic system, which is an open character and part of the economy and society. There are a few environmental factors to consider: -

The Organisation’s structure

HR environment

Value system

Physical resources

Mission and objectives

Financial and marketing resources

Plan and Policies

Corporate images

Labour management

Technical capabilities

The internal environment isn’t only influenced by activities and decisions their employees make; they also affect the way their employees behave within the organisation.

Employees behaviour within the workplace and their ability to make decisions.

An example of the internal environment could be within a typical organisation where the relationship between and employees is strict. This kind of environment means employees are given commands on what to do and are expected to do as asked. However, in a modern environment management more lenient with their employees, assigned work, respect their input and allowing them to expand their career.

Refers to the way information follows in an organisation

Is the employees and labour in an organisation

Also known as the organisation’s philosophy

Refers to the tangible assets of an organisation

Plays the role of deciding the future position of an organisation and where the organisation is in the market

Is what is referred to as the organisational culture

Refines the income or capital of an organisation

These are developed to help achieve the organisations’ goal

Important for the organisation’s corporate image

This is how an organisation deals with its employees and labourers

Implies to the technology the organisation uses

EXTERNAL ENVIRONMENTS

The simple definition for the external environment as described in the Cambridge Dictionary is ‘As the organisation’s external environment evolves, its goals must evolve to reflect this changing environment’. However, what does this mean?

For a business to keep ahead of their competitor it is important for them to keep ahead of their competitors and to continually adjust their strategies to fit in with the forever changing environment within the business sector they work in.

An external environment is an important part of the process and plays a critical place in building a future within the business sector your organisation is operating within. To help aid with analysing the external environment an organisation should consider using a PEST analysis, this will help give you an idea of the external environment you are in and what factors that could affect it.

POLITICAL – Is looking at the stability of the region, legal framework, trade regulations and tariffs

ECONOMIC – This relates to the economic system in the countries you operate, how well the financial markets work, the infrastructure, and the level of workforce

SOCIAL – Considers the demographics, education and class system, culture, and environmental awareness

TECHNOLOGICAL – Ensuring your organisation has all the up-to-date technology, impact on cost, new developments, and rate of diffusion

The external environment has several advantages and disadvantages which need to be considered: -

ADVANTAGES

PRICE ELASTICITY – Takes into consideration the increases and dec