IGNOU : M.COM : MCO 4 : UNIT 1 : Q - 2. Distinguish between (a) Internal and external environment, and (b) micro and macro environment.

Ans. (a) Internal and external environment

Internal Environment : There are a number of internal environmental factors that influence the strategic decisions in a business. Some of these factors are : Value system and ethical standards which the organization has adopted; Mission, goals and objectives of the companies as they determine the priorities, direction of development, philosophy, etc. of the business; Organizational structure determining the extent of professionalization of management, characteristics of available human resources like skill, morale, commitments, attitudes, etc.; Physical assets and facilities like nature of available technology, production capacity, hold on distribution logistics, which has a direct bearing on marketing efficiency; Financial factors such as financial position, composition of funds, sources of funds, capital structure, financial policies, etc. of the company; and Corporate image and brand equity which the company has created over the years. These internal sources of a company determine the degree of strength or weakness which a company has. Every company is supposed to make an efficient use of these sources to adapt its strategies to the external environment within which it operates. 

External Environment : The external environment encompasses a variety of factors which are largely beyond the control of individual firms and which may provide opportunities and 1 or pose threats to an organisation. These factors happen to be economic, demographic, political, legal, socio-cultural, technological and natural. They constitute the real business environment which provide the opportunities andlor pose threats to an organisation.

                (b) micro and macro environment.

Micro environment can be defined as the actors in the firm's immediate environment which directly influence the firm's decisions and operations. These include: suppliers: various market intermediaries and service organizations such as middlemen, transporters, warehouses, advertising and marketing research agencies, business consulting firms and financial institutions; competitors, customers and general public. While the customers constitute firm's market, suppliers and market intermediaries help providing the firm with inputs and assist in production and marketing processes. Competitors and general public ,also influence the way a firm conducts its business. 

Macro environment, on the other hand, consists of broader forces which affect the firm as well as other actors in the firm's micro environment. These include factors such as geographic, economic, financial, socio-cultural, political, legal, technological and ecological forces. Firms need to continuously monitor changes in these environmental forces and devise strategies to cope with them.