The environment of a firm may be defines as the 
    sum of all the elements and forces present in its 
       immediate and remote surroundings, which 
    have a potential impact on its ability to achieve 
    its objectives.  A firm does not exist in isolation. 
       It works within the overall environment and 
    must keep up with changes in the environment.
  Elements of the Business Environment
   The environment of the firm can be divided into two: 
   (1) Internal environment (micro environment) and 
   (2) External environment (macro environment).
   
   Internal Environment [Micro Environment]
   The internal environment of business refers to all 
   the factors or forces that have a more direct impact 
   on the daily activities of the company.  The main 
   factors in the internal environment are: customers, 
   suppliers, competitors, shareholders, financial 
   institutions, and employees.
    Customers
    According to Peter Drucker, “the ultimate aim of all business organization is to 
    create a customer” (The Practice of Management, p. 37).  Customers exchange 
    resources, usually in the form of money, for an organization’s products and services.  
    The customers expect the management to provide them with quality products and 
    services at reasonable prices which allow appropriate rates of return to its owners.  
    Management on the other hand, seeks to win customers’ loyalty through factual 
    information about their products which have been designed and developed, keeping 
    in view the customers’ expectations.
     
    Suppliers
    Suppliers refer to firms and individuals that provide the resources needed by the 
    company and its competitors to produce goods and services.  Inferior or sub-
    standard quality of raw materials or delayed supply of raw materials will hamper 
    (obstruct) the production process thereby increasing the cost of finished goods.  
    Management must purchase quality raw materials from reliable suppliers, and pay 
    them properly when the money is due.  The enlightened management always prefers 
    suppliers who are valuable sources of information on future trends in the raw 
    material market.
    Competitors
    These are companies that offer similar or alternative products and 
    services.  In pursuit of survival and growth, organizations must compete 
    with one another.  The presence of competition and rivalry forces each 
    organization to offer quality products at minimum prices.  Therefore, to 
    be successful, a company must provide greater customer value and 
    satisfaction than its competitors do.  Competition indeed brings out the 
    best in an organization and requires the management to constantly 
    strive for excellence.
     
    Shareholders
    These are the owners of the firm who can influence the policies and 
    procedures of the firm.  They do this by exercising their voting rights.  
    Bearing in mind the degree of the influence of shareholders, company 
    directors and managers are now becoming more conscious of the 
    decisions they make and how they carry out their responsibilities.
   Financial Institutions
   These include banks, insurance companies, and other 
   financial organizations.  Firms depend on these financial 
   organizations to provide them with capital to carry out 
   their business activities.
    
   Employees
   The organization’s labor force comprises of all the 
   individuals who are employed by the organization.  
   Employees are responsible for work in an organization.  
   The firm must take care of the needs of its employees by 
   providing a work environment that is conducive for them.