Top 10 External Factors That Affect Business Environment

In this session we will be discussing 10 external factors that affect business environment, and also discussing what are the external environment factors, the External environment factors definitions, Why are external environment factors important, and many more.

External environment factors are anything that influences the manner in which a business works and it’s capacity to address client issues.

They can be things like economic conditions, political events, natural disasters, or technological advancements.

External environment factors can have a significant impact on a company’s success or failure.

They can determine whether a company can stay afloat in tough times, whether it can expand into new markets, and even how profitable it is.

Before discussing 10 external factors that affect business environment we will be discussing what are the external environmental factors.

What are the external environment factors?

The external environment factors can be classified into macro and microenvironment.

Macroenvironment refers to the physical, social, and economic features of the environment.

Microenvironment refers to the individual characteristics and behavior of individuals in that setting (Erikson, 1969).

Physical features of the environment can include such things as weather conditions, terrain, and natural resources.

Social features can include demographics of a population (e.g., age, sex), levels of education or income, and levels of political stability.

Economic factors can include the availability of jobs and wages, tariffs or taxes imposed by governments on imported goods, and prices for goods and services.

People’s qualities in a setting can incorporate such things as orientation, age, ethnicity or race, language skills, socioeconomic status (SES), level of religiosity, or spiritual convictions.

The behavior of individuals in a setting can be influenced by norms established by those with power within that setting (e.g., officials in a government), as well as by individual attitudes and beliefs (Erikson 1969).

There is an assortment of manners by which outside ecological elements can influence business. External environment factors can influence business in a number of ways, including:

1. External environment factors can impact the level of economic activity in a country or region. For example, when tariffs are erected on imported goods, this can lead to decreased levels of economic activity.

2. External environment factors can impact the accessibility and cost of unrefined components and different information sources that organizations need to work on.

For example, when there is a drought in a region, businesses may be impacted as they need to purchase more expensive supplies from elsewhere.

3. External environment factors can influence the benefit or seriousness of organizations.

For instance, when there is a decrease in the worth of a country’s money, this will make it more expensive for foreign companies to do business in that country and may lead to decreased levels of investment and job creation.

4. External environment factors can affect purchaser conduct. For example, when there is widespread rioting or civil unrest abroad, this could lead to decreases in tourism and related spending by consumers within that country or region.

5. External environment factors can affect the well-being and security of representatives working inside organizations.  

For example, if there is instability overseas with regard to governments or militaries, this could lead to increased levels of workplace violence or accidents due to heightened fear among representatives.

6. Finally, external environmental factors can have an impact on the morale and performance of employees.

For example, if there is a decline in the value of the local currency and businesses are compelled to lay off staff, this could prompt a decrease in representative spirit and diminished efficiency.

Before discussing 10 external factors that affect business environment we will be discussing the External environment factors definition.

External environment factors definition

External environment factors are variables that affect an individual or a group of individuals in their everyday lives.

These factors can be environmental, economic, political, or social. They can either have a direct impact on the people or indirectly influence them through the actions of others.

External environment factors can be positive or negative and can change over time.

External environment factors in strategic management

External environment factors in strategic management can include economic conditions, technological advances, and geopolitical events.

All of which can impact a company’s ability to achieve its strategic objectives. For example, if the economy is weak, companies may be less likely to invest in new technologies that could improve their competitive position.

Conversely, if geopolitical events such as wars or revolutions affect a country’s economy, this could also have an impact on a company’s ability to succeed in the market.

Before discussing 10 external factors that affect business environment we will be discussing Why are external environmental factors important.

Why are external environment factors important?

One of the main reasons external environment factors are important is that they can have a significant impact on a company’s success or failure.

They determine whether a company can stay afloat in tough times, whether it can expand into new markets, and even how profitable it is.

For example, if the economy is weak, companies may be less likely to invest in new technologies that could improve their competitive position.

Conversely, if geopolitical events such as wars or revolutions affect a country’s economy, this could also have an impact on a company’s ability to succeed in the market.

external environmental variables can likewise hugely affect an organization’s overall revenues. For example, if the price of raw materials goes up, companies may have to increase their prices to cover the costs, which can lead to lower profits.

Alternately, assuming the costs of labor and products are diminished because of globalization or different elements, this could be good news for companies as it means they’re able to sell their products at a lower price and make more cash.

How external factors affect business environment

External environment factors can have a big impact on a company’s business strategy. For example, if the government is changing its economic policies regularly, this could lead businesses to re-evaluate their investment plans and priorities.

Alternatively, if one country becomes much more competitive than others in an industry, companies may decide to shift their focus there.

external environmental factors can also have an effect on how customers behave.

For example, if there’s a recession in Europe and people are starting to switch to cheaper airlines because they’re concerned about security issues, this could negatively impact airlines such as United Airlines (UAL) or American Airlines (AAL).

external environment factors are important because they can have a direct impact on how well a company performs.

By understanding how external factors can affect a business, managers can make better decisions that will help their company succeed.

How to identify external factors that affect business environment

There are numerous external variables that can influence a business environment. These factors can include economic conditions, political events, and natural disasters.

It is vital to recognize these variables with the goal that the business can settle on informed conclusions about its future.

Additionally, businesses should monitor their own internal environment to ensure that it is conducive to success.

10 external factors that affect business environment

There are ten external factors that can affect a business environment, and each can have a significant impact on its success. They include

• Political Factors
• Economic Factors
• Social Factors
• Technological Factors
• Legal Factors
• Demographic Factors
• Ethical Factors
• Natural Factors
• Global Factors
• Competitive Factors

Political Factors

Political changes can have a big impact on a business environment. For example, during the 2008 financial crisis, the global economy collapsed and many businesses were affected. This was due to increased political uncertainty and instability around the world.

Economic Factors

The economy can also have a significant impact on a business environment. For example, when there are economic downturns, it can lead to decreased traffic and sales, which can have a negative effect on businesses.

Technological Factors

Technology is constantly evolving, and this can impact how businesses operate. For example, new software or online platforms can disrupt current business practices.

Additionally, new technologies often bring about new security risks that need to be taken into account.

Legal Factors

Legal changes can also have an impact on a business environment. For example, legislation surrounding data privacy or cybercrime can change how companies operate.

Additionally, court rulings may create new legal obligations for businesses.

Demographic Factors

Changes in demographics can also affect a business environment. For example, if there are more people entering the workforce who are inexperienced with computers or are unfamiliar with current consumer trends, this may create challenges for companies that rely heavily on technology infrastructure.

Ethical Factors

Ethical considerations can also play an important role in how businesses operate. For example, some companies might choose to adhere to specific ethical standards when it comes to their labor practices or customer interactions.

Global Factors

The global environment can also have an impact on a business environment. For example, increased competition from abroad may lead to reduced profits for companies operating in a specific market.

Additionally, changes in geopolitical conditions (e.g., war or terrorism) can have a significant impact on the economy as a whole.

Competitive Factors

Changes in the competitive landscape can also affect how businesses operate. For example, if there is a shift in favor of “leaner and meaner” enterprises, then traditional companies may find it harder to comp

Social Factors

Changes in the social environment can also impact businesses. For example, if there is a rise in social activism, then companies may find it difficult to maintain customer loyalty.

Additionally, changes in social norms (e.g., the increasing acceptance of same-sex marriage) can have an impact on how companies operate.

Natural Factors

Changes in the natural environment can also have an impact on businesses. For example, a natural disaster (e.g., a storm or flood) can disrupt business operations.

Additionally, changes in the climate (e.g., an increase in temperature extremes) can affect a company’s ability to operate efficiently.

External environment factors examples

External factors that can affect the business environment include economic conditions, political events, and technological advances.

These can all have a direct impact on how successful a business is, and whether or not it remains in operation.

For instance, in the event that the economy is frail and clients are hesitant to burn through cash, a business might experience difficulty remaining above water. Conversely, if there is a major war going on nearby, businesses may experience increased demand but also an increased risk of damage or theft.

In addition to affecting individual businesses, external factors can also have an overall impact on the economy as a whole.

For instance, when there are major market crashes due to financial problems within specific countries or sectors of the economy, it can cause widespread economic instability.

Conclusion

External environment factors are important in the context of a study. They can impact the study in different ways, but all have an effect on the overall outcome of a study.

Some external environment factors include location, demographics, economic conditions, and social trends.

All of these factors can affect how people behave and what they choose to do. In addition, they can also impact the quality of research that is conducted.

Overall, external environmental factors are important to consider when conducting any type of study.