What Is Business Environment Analysis?

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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 14 October 2019
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Business environment analysis is the study of both the internal and external environmental factors related to a business, with the aim of finding out how such factors affect the business. The effect of such environmental factors may either be positive or negative. This includes such internal factors as the type of corporate culture in place in the organization and the corporate structure. The external environmental factors include factors like the competition, consumers, location and government regulations.

Studying the corporate culture as a part of a business environment analysis involves an assessment of the type of corporate culture the company has in place. A corporate culture includes the guiding principles that a company has instituted, such as the level of formality in the organization, the dress code of the various employees, and the way the employees and leadership interact. The purpose of studying the corporate culture during a business environment analysis is due to the fact that the corporate culture has an important effect on the success of a business. An organization with a solid corporate culture has more chances of doing well in comparison to one with a poor corporate structure. Employees in companies with good corporate cultures have a good morale, are more motivated and consequently more productive.


Internal corporate structure in relation to a business environment analysis includes a study of the immediate premises of a company, including the office buildings and other related facilities. External corporate structures include an analysis of the external environment, including the location of the company, the structures, and the location of related factors, such as suppliers and distributors. The structure of a company as well as the location and structures of suppliers and distributors are important, because they influence the effectiveness of the movement of goods and raw materials from one section to the other. The size of a distributor’s warehouse matters because it determines the number of goods that can be stored for distribution to retail outlets.

Other relevant external environmental factors include the number of competitors in the business environment and their effect on the business. A company with too many competitors that produce the same or similar products can affect a business in a negative manner. Government policies that are in place in the location also come into consideration, because favorable government policies may be considered to be opportunities while unfavorable government policies may constitute part of the threats to the success and survival of the business.


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