Physical Environment

Organizations are the products of physical environment in the main. All organizations whether they are engaged in business or non-business activities draw the inputs from the environment, convert the inputs into a puts and send them back to the physical environment. So every organization has a two-way interaction with the physical environment. It is true that today's business organization is an open system which is influenced by the environment and in turn influences the environment. The physical environment of the business consists of two components internal environment and external environment. An organization’s internal environment consists of conditions and forces within the organization. Its major components include its owner, board of directors, employees, organized labor. and the organization’s culture. On the other hand, the external environment is everything outside an organization that might affect it.