Difference Between Internal and External Business Environment

Internal Business Environment and External Business Environment are two types of processes that are widely using in all over the world for many purposes. Both activities may overlap the functionalities as well as have some key differences.

Main Difference

An internal Business Environment is an activity or process that is held within an organization. External Business Environment, on the other hand, refers to the factors that impact an organization or company, such as economics, conditions, policies, terms, and other factors.

One comprises elements inside the company, while the other comprises aspects outside the company. In detail, let us discuss the significant differences between Internal and External Business Environments.

What is Internal Business Environment?

An internal Business Environment is a process or activity within a company or organization. It manages all internal matters of the company, improves efficiency, and reduces costs. Moreover, the organization can influence the internal business environment in a significant context.

It can have a direct impact on the performance and success of the organization. Company policies, leadership style, and employee motivation are good examples of Internal Business environments. Furthermore, the organization can change the internal environment to gain desired outcomes.

What is External Business Environment?

The External Business Environment comprises factors outside the organization that impact the company, such as economics, competition, policies, conditions, etc. It focuses on building relationships with external stakeholders and increasing market shares and revenues.

This Business Environment includes political, social, technological, legal, environmental, and economic factors. Moreover, it cannot be directly influenced by the organization. The elements are primarily uncontrollable and unmanaged by the company. In addition, the good examples of External Business Environment market trends, economic conditions, and government regulations.

Key Differences

  1. Internal Business Environment comprises factors inside the organization, while External Business Environment comprises elements outside the organization.
  2. The organization can influence the internal Business Environment, while the company cannot alter the External Business Environment.
  3. The components of the Internal Business Environment include structure and leadership. The features of the External Business Environment include social, legal, and political factors.
  4. Internal Business Environment can have a direct impact on the success of the company, whereas External Business Environment can have an indirect effect on the performance of the company.
  5. The Internal Business Environment communication is structured, while external Business Environment communication is relation-based.

Comparison Table

Aspects Internal Business Environment External Business Environment
Comprises of factors Inside the organization Outside the organization
Influenced by Can be influenced by an organization to a significant extent Cannot be influenced by the organization
Impact Have a direct impact on the performance of the company Have an indirect effects on the performance of the company
communication Formal, structured Informal, relationship-based


We conclude that Internal Business Environment and External Business Environment are pretty different. Both have different definitions, functionality, purposes, controlling, and impact.

About Alisha John

A Nature Lover and Freelance Writer! I write about daily practices for optimizing both happiness and health.

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