A business in order to remain successful and competitive has to adapt to the constantly changing environment. 

The significance of understanding the business environment is as follows:

1. Helps in formulating strategy and future planning. 

2. The analysis of business environment helps a business to identify new opportunities. 

3. Environment scanning helps the firms to identify threats which affect the business.

Internal factors of environment:

1. Value system: The success of an organisation depends upon the sharing of value systems by all members.

2. Vision and objectives: The vision and objectives of a business guides its operations and strategic decisions.

3. Management structure: The structure of management/board and their style of functioning, the composition of the board.

4. Internal power relations: This refers to the internal power relations that exist in an organisation. The relations among board members, and the CEO and employees, shareholders are the factors affecting in taking decisions.