“Challenges are gifts that force us to search for a new centre of gravity. Don’t fight them. Just find a new way to stand.” – Oprah Winfrey
As an entrepreneur or potential entrepreneur, it is important to continuously monitor the business environment since it does not only provide the source of business ideas through changes in the industry, market, technology, etc. but also makes you aware of what is happening so that you can be well prepared to take advantage of any changes in the business environment.
The term “environment” is used to refer to the surroundings and conditions in which we live, which affect the way we live. For example, there are natural factors such as air, water, rain and seasons, etc. which affect the way we live and do things. There are also things that are not natural which also affect the way we live such as actions of governments, economic conditions, moral values, etc. which affect the way we live. The same applies to business.
The environment in which a business operates is usually divided into three categories namely, macro, micro, and internal factors as depicted in the picture below.
The Macro-environment.
The macro-environment is the conditions that exist in the global economy or markets that affect the operations of a business. They are usually evaluated using the acronym PESTEL which stands for “Political”, “Economic”, “Social”, “Technological”, “Environmental” and “Legal” factors. The macro conditions affect businesses today more than ever before as globalisation allows what happens in one country or region to affect others.
The Microenvironment.
These are conditions or changes in the immediate surroundings of a business that affect its operations. It includes the suppliers, competitors, marketing intermediaries, customers, pressure groups and the general public.
The Internal Environment. Internal environmental factors are events that occur within an organisation. Generally speaking, internal environmental factors are easier to control than external environmental factors. Some examples of internal environmental factors are as follows:
- Management changes
- Employee morale
- Culture changes
- Vision
- Mission
As can be seen from the diagram above, many things within the immediate and external environment affect a business. This relationship continues until the business is discontinued, but as long as a business is in existence, there are a lot of factors in the environment to contend with. Moreover, we live in a period of constant change because of technological advancement where products and services are frequently made obsolete as new ones emerge. Consequently, monitoring the business environment is not only a source of the business idea but a vital and continuous task for any business if it is to continue to survive.