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9 External Environment Factors That Affect Business

This document discusses 9 external environment factors that affect businesses: 1) Technological factors 2) Economic factors 3) Political and legal factors 4) Demographic factors 5) Social factors 6) Competitive factors 7) Global factors 8) Ethical factors 9) Natural factors. It explains that external factors exist outside a business and can impact operations, and that monitoring these factors allows businesses to protect themselves from challenges and changes in the external environment.

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Nicks Abella
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89 views

9 External Environment Factors That Affect Business

This document discusses 9 external environment factors that affect businesses: 1) Technological factors 2) Economic factors 3) Political and legal factors 4) Demographic factors 5) Social factors 6) Competitive factors 7) Global factors 8) Ethical factors 9) Natural factors. It explains that external factors exist outside a business and can impact operations, and that monitoring these factors allows businesses to protect themselves from challenges and changes in the external environment.

Uploaded by

Nicks Abella
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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9 EXTERNAL

ENVIRONMENT FACTORS
THAT AFFECT BUSINESS

Module 4
Business environments change frequently and require
consideration when planning and conducting operations.
Business managers and executives have a responsibility to
examine internal concerns for how they may influence company
decisions. It's also important to monitor any external
environmental factors that can affect how the business functions
as well as develop methods for overcoming these challenges. In
this article, we discuss what external environment factors are,
their importance and nine of these factors that affect businesses.
WHAT ARE EXTERNAL
ENVIRONMENT FACTORS?
External environment factors are elements that exist outside
of a company's internal environment that can affect a
company's operations. These outside forces can help the
business or present challenges to its current processes.
Managers often keep track of external environment factors so
they can recognize and resolve the issues the factors cause
and make appropriate changes.
Why are external
environment factors
important?
External environment factors are important because they can
cause direct and indirect effects on business operations,
personnel and revenue. The external environment of a company
changes constantly in ways beyond the company's control, but
executives and managers can track these changes and minimize
their consequences. Choosing to monitor the dynamic nature of
external environment factors allows businesses to protect
themselves against predictable events and mitigate the effects
of unexpected changes.
1. TECHNOLOGICAL FACTORS

As technology continues to advance, companies can benefit from


these breakthroughs or face challenges in competing with them.
For example, a company that manufactures GPS devices for
personal cars may experience a decline in business because of the
integration of GPS on mobile devices, but they can confront these
challenges by developing new products. Other companies, such as
healthcare providers, can use modernized methods to collect
information from their patients, keep patient records and
streamline patient care.
The state of the economy plays an
important role in every aspect of
daily life, from the well-being of
personnel to the ability of a
company to thrive. When the
2. economy trends downward and
ECONOMIC unemployment rises, businesses
may have to work harder to keep
FACTORS their staff and change their
processes to continue earning
revenue. If the company produces
products for retail sale, for
instance, they may consider
lowering the price to increase sales
and positively affect their revenue.
As political officials
leave office and new
3.
POLITICAL
ones replace them, the
policies they
implement often affect
businesses in relevant
industries. Because of
the inconsistent nature
of politics, businesses AND LEGAL
FACTORS
monitor legislative bills
closely to prepare for
potential changes.
Policies that can have
long-term effects on
companies include:
Taxation

Tariffs

Employment law

Competition regulation

Import restrictions

Intellectual property law

Companies affected by political decisions must modify


their processes to comply with new legislation and
regulations, but doing so can keep them in business.
4. DEMOGRAPHIC
FACTORS
Companies with successful products and services
evaluate the demographics of their target market to
ensure they meet the needs of those who benefit
from their offerings. They also perform tests to
measure how well they serve their customers. This
helps them understand if their target market has
changed and how they can develop better ways to
serve their loyal customers and earn new ones.
Demographics that affect business decisions and
processes include:
•Age
•Gender
•Race
•Nationality 4.
•Belief system DEMOGRAPHIC
•Marital status
•Occupation
FACTORS
•Income
•Level of
education
For example, when mobile phone
companies emerged in the 1990s, their
marketing efforts focused on young,
successful professionals. Now, people of
all ages and backgrounds use mobile
devices daily. Telecommunications
companies have adapted to this change
by modifying the features of their
products and taking different approaches
to advertising methods.
5. SOCIAL
FACTORS
Where people live, their personal values
and their socioeconomic status affect
what, where and why people make
purchases. Businesses take social factors
into consideration when developing and
marketing products, and many use current
events, movements and social issues to
appeal to their customers. For example, a
company that supports a women's
organization may earn the trust and
loyalty of customers who identify as
female. Catering to the specific
preferences and expectations of minority
groups, who have more influence on the
market today than in past years, can also
contribute to customer satisfaction and
business growth.
6. COMPETITIVE FACTORS

Businesses can increase their market share and stay relevant


to their customers by keeping track of their competitors. They
can identify and evaluate successes and challenges, thus
learning what to incorporate into their own processes and
how to prevent revenue loss. They can also use the
information they gather to develop ideas for product changes,
product relaunches and new product development.
7. GLOBAL FACTORS

Executives have a duty to keep track of both domestic and global


issues, especially if they conduct business internationally. By
learning about social issues that affect those in other countries
and their cultural norms, consumer trends and economic status,
company leaders can provide their teams with relevant training.
This enables them to develop products or offer services that meet
the needs of international customers by providing solutions to
challenges they face as consumers.
8. ETHICAL
FACTORS
Because each individual has a distinct concept
of ethics and morality, some companies may
find it challenging to balance the personal
lives of staff members with their expectations
in the workplace. Employees' leisure activities,
such as social media accounts, can reflect on
their employer. As representatives of the
company, they have a responsibility to avoid
behavior that could negatively affect the
business. Managers can address issues such
as sharing classified information or the
harassment of a colleague outside of work by
establishing guidelines and taking disciplinary
action when necessary .
9. NATURAL FACTORS

As environmental awareness continues to grow, more consumers


have realized the effects of business processes on the planet. Some
consumers have used their purchases to support companies that
develop ecologically friendly practices, such as using compostable
packaging and solar energy. By paying attention to these external
concerns and changing their operations, businesses can make
changes that help them protect the environment, retain customers
and increase revenue.

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