External Factors Affecting Business – 2023
Table of Contents
External Factors Affecting Business – External factors outside the company influence business development, such as competition, the business climate, the political and legal environment, technological advances, or significant world events.
Business decisions remain influenced by two types of factors: internal and external. Internal factors originate within or are under the company’s control, such as B. Human resources, organizational structure, company culture, etc. External factors are elements that come from outside, for example, from the organization.G. Competition, New Technologies, and Government Policy.
External Environmental Factors Affecting Business
External Factors Affecting Business. Business environments change frequently and must become considered when planning and executing operations. Company directors and executives have a responsibility to consider internal concerns about influencing business decisions.
It is also essential to monitor any external environmental factors that may affect the business’s operations and develop methods to address these challenges. This article looks at external environmental factors, what they mean, and nine of those factors that affect businesses.
What Are The External Factors Of The Environment?
External environmental factors exist outside of a company’s internal environment and can affect a company’s operations. These external forces can either help the business or challenge your current processes. Therefore, managers often watch external factors in the environment to identify and correct the problems causing the elements and make changes accordingly.
Why Are External Environmental Factors Important?
External environmental factors are essential as they can, directly and indirectly, impact business operations, staff, and revenue. A company’s external environment is constantly changing outside of its control, but leaders and managers can track these changes and minimize their impact. Choosing to display the dynamic nature of external environmental factors allows organizations to guard against predictable events and mitigate the properties of unexpected changes.
Nine Types Of External Environmental Factors
These are the nine types of external environmental factors that affect businesses:
1. Technological Factors Is One Of The External Factors Affecting Business
Companies may benefit from these advances or face challenges when competing with them as technology advances. For example, a business that manufactures GPS devices for passenger cars may experience a downturn in the industry due to the integration of GPS into mobile devices but may meet these challenges through new product development
2. Economic Factors Is One Of The External Factors Affecting Business
The state of the budget plays a significant role in all aspects of daily life, from the well-being of employees to a company’s success. As the economy weakens and unemployment rises, companies may have to work harder to retain employees and change their processes to continue generating revenue
3. Political And Legal Factors
When politicians leave office, and by new ones, their policies often impact companies in the sectors concerned. Due to the inconsistent nature of the policies, companies closely monitor invoices to prepare for possible changes
4. Demographic Factors
Companies that offer successful products and services assess the demographics of their target market to ensure they are meeting the needs of those who will benefit from their offerings. They also run tests to measure how well they attend to their customers. It helps them know if their target market is different and develop better ways to serve their loyal customers and attract new ones.
5. Social Factors Is One Of The External Factors Affecting Business
Where people live, their values and socioeconomic status influence what, where and why people buy. Businesses consider social factors when developing and marketing products, and many of them use news, movements and social issues to attract their customers
6. Competitive Factors
Businesses can increase their marketplace share and stay relevant to their customers by following their competitors. They can identify and evaluate achievements and challenges, learn what to incorporate into their processes, and avoid losing revenue. You may also use the information collected to generate product modifications, new product launches and new product developments.
7. Global Factors
Managers must follow national and global issues, mainly when they operate internationally. By learning about the social problems affecting people in other countries. Their cultural norms, consumption trends and economic status, business leaders can provide relevant training to their teams
8. Ethical Factors
Because each individual has a different understanding of ethics and morals. some organizations can find it challenging to balance employees’ personal lives with their expectations in the workplace. Employee hobbies such as Social media accounts, for example, can impact your employer. As company representatives, you are responsible for avoiding conduct that could harm the company. Supervisors can address issues such as leaking classified information or harassing a co-worker outside of work by setting policies and taking disciplinary action where necessary.