Internal and External Environments that Affect Businesses (Essay Sample)

Strategic Management
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External Business Environment
Organizations set goals and objectives that will drive the success of its business. The organizations formulate strategies that will help achieve its business objectives. Chapter two aims to instill readers with the necessary knowledge to analyze and understand a company’s external factors. Businesses are affected by external factors such as taxation and government regulations. Different organizations operate under different regulations and laws. Thus, it is important to understand the types of regulations for each industry. The chapter also helps readers identify the various external forces and how such forces affect a business’s profitability. Competitors are part of the external environment of organizations, (Pidhurska & Lehkyy, 2018). Chapter two provides the various options that organizations should take to thrive in a competitive environment. For example, readers should learn that organizations can use pricing to gain a competitive advantage over competitors. Finally, readers should understand strategic groups and their impacts on firm’s operations.
Internal Business Environment
The contents of chapter three provide the importance of understanding a firm’s internal environment. Apart from the external environment, internal factors are critical to the success of businesses. Internal factors may include capital structure, core values, sources of revenue, and human resources. The importance of understanding internal factors such as capital structure helps organizations avoid cases of financial difficulties such as insolvency or high debt burden, (Kostyanaya, 2016). Again, the chapter equips readers with knowledge to differentiate and classify company resources. Organizations have intangible and tangible resources. The chapter also enlightens readers on current trends affecting internal environment of businesses. An example of such trends is outsourcing, which involves a