Every business faces two types of environments simultaneously i.e Internal Environment and External Environment.

1. INTERNAL ENVIRONMENT

All those factors within an organization which impart strengths or cause weaknesses constitute the internal environment. These factors can be controlled by business but they are quite important in shaping the
behaviour of people working in it. Hence, managers have to take internal factors into account while taking actions.

2. EXTERNAL ENVIRONMENT

All those factors outside the organization which provide opportunities or pose a threat to the organization make up the external environment.

These factors are those over which the business organization has no
control.

According to William Glueck and Jauck

“In environment there are external factors, which constantly bring opportunities and threats to the business firm. In includes Economic, Social, Technological and Political conditions.”

Examples of situations that may cause change in the external environment include:

(i) Improvement in production techniques
(ii) Fluctuations in the levels of demand
(iii) Fluctuations in interest rates
(iv) Changes in laws and regulations
(v) Changes in taxation
(vi) New social trends, fashions or life styles
(vii) International influences