Question
Give the factors which constitute external environment of a business.
Answer
- Economic factors: These comprise the general state of the economy, including GDP growth rates, inflation, interest rates, currency exchange rates, and unemployment rates. Consumer spending, corporate investment, and market demand can all be impacted by economic conditions.
- Competitive Factors: The industry's competitors' activities and plans make up the competitive environment. A firm can be strongly impacted by variables like the number of competitors, their market share, pricing strategies, product differentiation, and industry competition.
- Political Aspects: Political aspects include stability, rules, and policies of the government. Taxation laws, trade restrictions, labor laws, political stability, and governmental aid to or interference in the economy are only a few examples.
- Demographic patterns, society values, beliefs, and attitudes are all examples of socio-cultural influences. They have the power to affect consumer behavior, market trends, and the perceived social acceptability of goods and services.
- Technological aspects: Innovation and technological advancements can have a significant impact on organizations. The speed of technology advancement, automation, research and development (R&D), and the accessibility of technological infrastructure are some of these variables.
- Laws and regulations that have an impact on business operations are referred to as legal considerations. These could include laws governing employment, health and safety, intellectual property, consumer protection, and the environment.
- Environmental Considerations: Businesses are increasingly required to take environmental considerations into account, including climate change, sustainability, resource availability, and environmental restrictions. These elements may have an effect on a business' operations, standing, and long-term viability.
i) Economic
ii) Demographic
iii) Legal-political
iv) Technological
v) Cultural
vi) Competitive
vii) Physical
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