An organization is effected by two main types of environments the external environment and the internal environment. The external environment pertains to the political economic, social, technological and the legal environment and any changes that take place in these environments indirectly effect the environment of any business. The internal environment on the other hand is based on the business environment of the company which composes of the competitors, the market, the customers and the stakeholders of the business. In order top survive and be successful in its operations a business has to adapt to the external environment and management its internal environment to its best efforts.

The following paper conducts an analysis of the external environment for the Bank of America highlighting the remote macroeconomic environment, the industry environment nd the operating environment for the company.

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Industry Overview Bank of America is an established and well reputed bank which primarily operates in North and South America. The company provides banking as well as non banking related services pertaining to finance. The company is a highly diversified entity which provides customized was well as standardized services to its customers in various other industrial and consumer secrtors. “The company operates through four business divisions: global consumer and small business banking, global corporate and investment banking, global wealth and investment management and all other.” (‘Company Profile -Bank of America’, Datamonitor)

As a result the industry in which the company operates in is the American banking industry. This industry is largely dominated by the commercial banks and the retail and investment banks in region. The commercial sector mostly provides products which pertain to retail banking, and financial services for small and medium corporations.

The industry in the US pertaining to commercial banking has been reporting high levels of performance regardless of the decline in the rate of growth in the economy. “The United States commercial banking industry generated total revenues of $502.7 billion in 2006, this representing a compound annual growth rate (CAGR) of 5.5% for the five-year period spanning 2002-2006.” And “The interest sector proved the most lucrative for the US commercial banking industry in 2006, generating total revenues of $278.3 billion, equivalent to 57.1% of the industry's overall value. In comparison, the non-interest sector generated revenues of $215.4 billion in 2006, equating to 42.9% of the industry's aggregate revenues.” (‘Commercial banking in the united states’, 2007)

However due to the imminent depression/ recession in the US economy, the industry is also forecasted to report decline in the rate of growth as well. The other large sector in the industry relevant to the Ban of America is the retail and investment sector. This has been facing reduced level of performance due to the recessionary economic indicators in the last year. “In 2007 the United States retail savings and investments market experienced significant deceleration when compared to its performance in previous years and experienced growth of just 3.5%.”(‘Retail Savings and Interests in the United States’, 2007)

Key Macroeconomic Variables The key macroeconomic variables which affect the Bank of America and the banking industry include the interest rate in the market, the Consumer Price Index (CPI), the exchange rate of the local currency, the mortgage and investment rates, the oil and gas rates in the international market as well as the employment level in the region and the degree of development taking place to make way for future growth.

Macroeconomic variables and Corresponding Industry Variables

The two macroeconomic economic variables that have been chosen pertain to the interest rates and the inflation in the United States.