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Business Jargons

A Business Encyclopedia

Internal Environment

Definition: Internal environment is a component of the business environment, which is composed of various elements present inside the organization, that can affect or can be affected with, the choices, activities and decisions of the organization.

It encompasses the climate, culture, machines/equipment, work and work processes, members, management and management practices.

In other words, the internal environment refers to the culture, members, events and factors within an organization that has the ability to influence the decisions of the organization, especially the behaviour of its human resource. Here, members refer to all those people which are directly or indirectly related to the organization such as owner, shareholders, managing director, board of directors, employees, and so forth.

Factors Influencing Internal Environment

The factors which are under the control of the organization, but can influence business strategy and other decisions are termed as internal factors. It includes:
internal environment

  1. Value System: Value system consists of all those components that are a part of regulatory frameworks, such as culture, climate, work processes, management practices and norms of the organization. The employees should perform the activities within the purview of this framework.
  2. Vision, Mission and Objectives: The company’s vision describes its future position, mission defines the company’s business and the reason for its existence and objectives implies the ultimate aim of the company and the ways to reach those ends.
  3. Organizational Structure: The structure of the organization determines the way in which activities are directed in the organization so as to reach the ultimate goal. These activities include the delegation of the task, coordination, the composition of the board of directors, level of professionalization, and supervision. It can be matrix structure, functional structure, divisional structure, bureaucratic structure, etc.
  4. Corporate Culture: Corporate culture or otherwise called an organizational culture refers to the values, beliefs and behaviour of the organization that ascertains the way in which employees and management communicate and manage the external affairs.
  5. Human Resources: Human resource is the most valuable asset of the organization, as the success or failure of an organization highly depends on the human resources of the organization.
  6. Physical Resources and Technological Capabilities: Physical resources refers to the tangible assets of the organization that play an important role in ascertaining the competitive capability of the company. Further, technological capabilities imply the technical know-how of the organization.

Internal environmental factors have a direct impact on a firm. Further, these factors can be altered as per the needs and situation, so as to adapt accordingly in the dynamic business environment.

Related terms:

  1. Organizational Culture
  2. Internal Control
  3. Business Environment
  4. Micro Environment
  5. Macro Environment

Reader Interactions

Comments

  1. Samuel Twumasi Ofei says

    April 2, 2019 at 7:37 pm

    Who manages the internal environment of an organization?

    Reply
    • Vimbai chitake says

      March 30, 2021 at 11:30 pm

      Thank you ! this is very useful to us

      Reply
  2. hareem says

    October 24, 2019 at 10:20 pm

    AMAZING WEBSITE FOR BEGINERS

    Reply
  3. Shivani Sanjana says

    October 30, 2019 at 10:38 am

    very useful informations

    Reply
  4. pinias muchefa says

    November 27, 2019 at 3:37 pm

    fairly written

    Reply
  5. Suman says

    February 4, 2020 at 2:23 pm

    Really it is very useful for us. The information that you have shared is really useful for everyone.
    Thank You

    Reply
  6. B says

    April 15, 2020 at 8:41 am

    Thank you so much , really helped me to start an outline for my paper.

    Reply
  7. Jastina says

    May 10, 2020 at 8:21 pm

    thx for the information, its has given me a hint on my assignment

    Reply
    • Adan Ibrahim says

      November 3, 2020 at 1:00 pm

      Me too

      Reply
  8. ORAPELENG says

    May 25, 2020 at 2:12 am

    very informative and well structured.

    Reply
  9. RAGHAVAN HARATHY says

    November 3, 2020 at 12:51 pm

    very informative

    Reply
  10. Gcobisa Qinga says

    April 25, 2021 at 11:51 pm

    Thank you very didactic.

    Reply
  11. Irene Mbele says

    May 24, 2021 at 5:44 pm

    Thank you very much, very helpful and well structured

    Reply
  12. Hellen Nxumalo says

    June 15, 2021 at 11:06 pm

    This elaboration is excellent, I comprehend very well and and has a clear light on what is going on within and outside the business, whether big or small.

    Thank you

    Reply
  13. Ben Angoa says

    June 30, 2021 at 8:52 pm

    This is a perfect start for me. All the information, I require that can support me to understand the course is well placed and simple to understand.

    Reply
  14. cess says

    July 7, 2021 at 7:29 pm

    who’s the author of this article?

    Reply
    • Surbhi S says

      July 8, 2021 at 9:46 am

      The author of this article is Surbhi S.

      Reply
  15. Shuaib Morawaji says

    December 26, 2021 at 11:25 am

    Thanks. I used the information here for my assignment in Strategic Management class.

    Reply
  16. Eva says

    November 15, 2022 at 5:36 pm

    Hi!
    In what year was this article published? I do need this for my study work.

    Reply
    • Surbhi S says

      November 23, 2022 at 11:50 am

      The article was published in the year Feb 2019

      Reply
  17. virgildo sabalo says

    March 28, 2023 at 3:34 am

    Very informative. Thanks.

    Reply

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