12-06-2017, 10:28 AM
Business environment is the sum total of all external and internal factors that influence a business. You should keep in mind that external factors and internal factors can influence each other and work together to affect a business. For example, a health and safety regulation is an external factor that influences the internal environment of commercial operations. In addition, some external factors are beyond your control. These factors are often called external constraints. Let's look at some key environmental factors.
External factors
Political factors are government activities and political conditions that can affect your business. Examples include laws, regulations, tariffs and other trade barriers, wars and social concerns.
Macroeconomic factors are factors that affect the entire economy, not just your business. Examples include things like interest rates, unemployment rates, currency exchange rates, consumer confidence, discretionary consumer incomes, consumer savings rates, recessions and depressions.
Microeconomic factors are factors that can affect your business, such as the size of the market, demand, supply, relationships with suppliers and their distribution chain, such as the retail stores that sell their products and the number and strength of their competition.
Social factors are basically sociological factors related to society in general and social relationships that affect your business. Social factors include social movements, such as environmental movements, as well as changes in fashion and consumer preferences. For example, clothing fashions change with the season, and there is a current trend towards green building and organic food.
Technological factors are technological innovations that can benefit or hurt your business. Some technological innovations can increase your productivity and profit margins, such as computer software and automated production. On the other hand, some technological innovations represent an existential threat to a business, such as Internet transmission challenging the DVD rental business.