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2. Describe the internal and external environments of the firm. Differentiate the
microenvironment from macroenvironment.
- Internal Environment refers to all the inlying forces and conditions present within the
company, which can affect only the company. External Environment is a set of all the
exogenous forces that have the potential to affect the organization's performance,
profitability, and functionality. Its nature is uncontrollable and affects all companies
operating industry. The micro-component of the external environment comprises
external forces and factors that are directly related to the business and the macro
environment constitutes the external factors and forces that affect the whole industry
3. Why is it necessary for managers to be familiar with the environment of their firms?