Organizational Environment: Definition & Types

What is Organizational Environment

The term “Organizational Environment” refers to the internal and external factors with which the organization functions. Organizational activities are largely influenced by the environment. In an organization, management has to consider its internal and external environment to make efficient decisions and combat future potential threats. Businesses operate as part of an environment, which is known as the business environment.

Types of Organizational/Business Environment

Business Environment can be classified into the following categories:

Internal Environment &
External Environment

Internal Environment is the combination of factors that are directly involved in the business and have a direct influence on the business. The elements of the internal environment remain within the organization’s boundaries. For example: Owners and Shareholders, Board of Directors, Employees, Organizational Culture, Resources of the Organization, Organization’s image/goodwill, etc.

The external environment is the set of factors that lie outside the business organization. The organization doesn’t have direct control over the external environment factors. For Example: Suppliers, Customers & Buyers, Competitors & New Entrants, Regulators, and Strategic Partners, etc.