AS A Level Business: Internal Business Environment

Cambridge AS A Level Business Studies/ ZIMSEC Advanced Level Business Studies/ Business Enterprise Skills Notes: Internal Business Environment

As has been said the term business environment is used to refer to a combination of internal and external factors that influence a business’s operating situation
Notes on the external business environment can be found here
Here we will examine the internal business environment
A business’s internal environment refers to conditions, entities, events, and factors within an organization that influence its activities and choices
Generally, the internal environment is composed of the following:
- Stakeholders e.g. employees and management
- Corporate culture
- Leadership style of the organisation
- The organisation’s mission statement
Stakeholders, in this case, refers to those people/groups of people within the organisation that affect and are affected by its activities
Naturally, this excludes external stakeholders such as the government or customers
Employees who work for the organisation their attitudes, skills and beliefs influence the internal business environment and makes it unique compared to the environments of other businesses
Managers are responsible for controlling and steering the organisation, the culture it adopts e.g. liberal, Christian, conservative etc.
Managers can craft and influence the recruitment policy, decided what skills workers have etc
Shareholders are the owners of the business and in large businesses, they usually cede everyday control of the business to managers, they still retain some sort of control
Shareholders can choose the strategic direction which the business will take and therefore its overall environment for example for companies like Fox TV network are owned by conservatives and have a conservative bias in the US. A Muslim owned company would tend to adopt a Muslim culture itself etc.
A mission statement is a written declaration of an organization’s core purpose and focus that normally remains unchanged over time
An organisation’s internal environment is supposed to be fashioned after that organisation’s mission statement
The values and behaviours that contribute to the unique social and psychological environment of an organization
While a mission statement is what the organisation wants to be, organisational culture is what the organisation is
It is the soul of the organisation’s internal environment
There are also several leadership styles that the organisation can adopt for example an autocratic leadership might create an intolerant environment while a laissez-faire leadership style might foster a creative and stimulating internal environment