Difference Between Internal And External Environment

Internal business environment (micro environment) is composed of factors or forces within the firm such as management structure, employees skills and ability, production technology etc. It directly influences daily business activities of the business firm. On the other hand, external environment (macro environment) can be defined as a set of exterior factors such as political , legal ,demographic, socio-cultural, technological environment etc. External business environment makes long-term impact in the business.

 

Difference Between Internal Environment And External Environment

The major dissimilarities or difference between internal and external business environment can be highlighted as follows:

1. Introduction

Internal Environment: It refers to a totality of internal forces (investors, intermediaries, customers etc) that directly impact the business.

External Environment: It refers to a totality of external forces (politics, economic, legal environment etc.) that indirectly impact the business.

2. Involves

Internal Environment: It involves within the business.

External Environment: It involves outside the business.

3. Known As

Internal Environment: It is also known as micro environment.

External Environment: It is also known as macro environment.

4. Includes

Internal Environment: It includes customers, suppliers, competitors, distributors, marketing intermediaries, public, shareholders etc.

External Environment: It includes politic, socio cultureal, legal and technological environment.

5. Controllable Or Not

Internal Environment: It exists within the organization, so it can be controlled by taking appropriate steps.

External Environment: It exists outside the business, so it cannot be controlled by the firm.

6. Impact

Internal Environment: It has a short term impact in the business

External Environment: It has a long term impact in the business

7. Influence

Internal Environment: It influences specific business organization only.

External Environment: It effects all types of business firms.

8. Shows

Internal Environment: It shows the strength or weakness of the business

External Environment: It shows opportunities or threat to the business

Internal Vs External Environment (Comparison Chart)

Basis	Internal Environment	External Environment
Introduction	Internal forces that influence the business directly	External forces that influence the business indirectly
Involves	Inside the organization	Outside the organization
Known As	Micro environment	Macro environment
Includes	employees, customer, suppliers, public etc.	Political factor, cultural factor, technological factor, legal factor etc.
Controllable	Yes	No
Impact	Short term	Long term
Affects	Certain business only	All types of business
Represents	Strength or weakness	Opportunities or threats

Distinction Between Internal And External Business Environment In Short

- Internal environment consists of in-house forces or factors of the company. External environment consists of exterior factors.

- Internal environment can be controlled. But external environment cannot be controlled by the management.

- Internal environment represents strength or weakness of the firm. Conversely, external environment offers opportunities or threats to the firm.

- Internal environment affects specific business firm or company. But external environment affects the entire industry.