Senior Business

Environmental Factors


Things out in the ‘big wide world’ that affect everybody.


Things to do with the industry the business operates in e.g. Hospitality.


Things inside the organisation that directly impact the business.

ALL FACTORS affect how a business organises and manages operations.

Video: Environmental factors

Macro, operational, and internal environmental factors are different categories of environmental factors that can affect the operations and performance of a business.

This video details each of the three categories and provides an overview of how they can impact businesses. 

Internal environment

Internal environmental factors are the conditions, resources, and capabilities within a business that affect its operations, performance, and decision-making. These factors can include aspects such as the company’s culture, management style, organisational structure, resources (such as employees, technology, and finances), and operational processes.

Factors that directly influence the approach and the success of the operations INSIDE a business

  • Can impact business in a positive or negative way
  • Can be controlled by the business


Culture can influence employee motivation, productivity, and job satisfaction. If the culture is positive and supportive, employees are more likely to be engaged and invested in their work, leading to increased productivity and job satisfaction. On the other hand, if the culture is negative or toxic, employees may be disengaged, leading to decreased productivity and higher rates of employee turnover.


Managers have a significant impact on employee morale and productivity. If management is hands-on and supportive, employees may feel empowered and motivated to perform well. However, if management is overly controlling or micromanaging, employees may feel frustrated or demotivated, leading to decreased productivity and lower job satisfaction.


Processes within a business can affect its efficiency and productivity. Streamlined and efficient processes can help a business reduce costs, improve customer satisfaction, and increase overall productivity. However, if processes are outdated or inefficient, they can lead to increased costs, lower productivity, and a competitive disadvantage in the market.

Understanding the internal environmental factors that impact a business is important for its success. By identifying areas for improvement and addressing issues as they arise, a business can optimise its operations, improve employee morale and productivity, and maintain a competitive advantage in the market.

Operating environment

Operating factors directly influence the operations of an industry or business

They consist of stakeholders that are outside the business’s internal structure and that impact how the business functions.



A business must:

  • establish customer-base
  • gain loyalty
  • build relationships
  • find customers
  • monitor consumer trends

Effective customer service policies build strong relationships.

High levels of customer satisfaction improve reputation and profit.


    A business must:

    • Provide the resources needed to operate
    • have a number of suppliers to spread risk of supply problems
    • maintain positive relationships with suppliers
    • Suppliers need to be:
      • Reliable
      • Timely
      • Cost-effective


      A business must:

      • consistently monitor competitors
      • adapt when competitor introduces new products or methods
      • be aware of emerging competitors

      A competitor is a business that is in the same or a similar industry and offers the same or a similar product or service.

        Macro environment

        The macro-environment consists of factors such as economic conditions, technological trends, social and cultural forces, legal and regulatory environment, and political factors.

        Changes in any of these factors can create opportunities or threats for businesses.

        For example, a change in consumer preferences towards environmentally friendly products may create a new market for businesses that can offer sustainable solutions.

        Changes in government regulations or trade policies can create obstacles or disrupt supply chains, impacting businesses’ ability to operate efficiently.

        Understanding and monitoring the macro environment is essential for businesses to identify potential risks and opportunities, adapt their strategies, and remain competitive in the marketplace.