Abstract

This paper examines the effect of external and internal environments on business performance, with specific reference to the Nigerian business environment. The methodology adopted was basically theoretical and narrative based on aggregative and specific strength, weakness, opportunity and Treat (SWOT) Matrix and political, Ecological, social, Technology, legal and economic factors (PESTLE) Analysis models, respectively. A review of related literature and exploration of theoretical framework provided more insight into the various effects of the factors of the environments on business performance. The appraisal showed that both external and internal factors exert influence on and shape the life, growth and development of the business; external environment bears more relevance to strategic management, and businesses adjust to external environment. It further revealed that the government now plays more of regulatory role in the business environment in some sectors of the economy, and that, though certain measures had been put in place at various levels to engender conducive business environment for private sector participation, external factors such as multiple tax system, policy summersault, non-passage of the Freedom of Information (FOI) Bill into law, high cost of capital, high interest and inflation rates, terrorism, culture, religion, volatile exchange rates, susceptibility of the economy to external shocks, infrastructure decay, dismal power supply, etc., escalated cost of doing business in Nigeria and, thus, posed serious threats to firms performance. While many business organizations had leveraged on their strengths and explored opportunities in their environment, many more were overwhelmed by their weaknesses and, thus, failed before the growth and maturity stages, with the attendant implication that many small and medium scale enterprises did not grow, develop and transform into large and mega scale corporate businesses. Consequently, reconsideration of such environmental factors that impose unnecessary constraints on businesses in Nigeria was recommended.