Question

Should the impact of possible impact of environmental forces matter to an organization? Why or why not? How does the breakdown of PESTEL help us identify relevant, changing environmental forces?

Answer 1

The impact of environmental forces is very vital on the overall performance of an organization. These factors determine the operations and outcome of the business. When there is an impact on the environmental forces, its effect on the business can be witnessed clearly. It impacts the busines by changing the demand, supply, sales, needs, etc. of the products/services that an organization deals in.

The environment forces that control and impact an organization are : Political factors, Economic factors, Social factors, Technological factors, Environmental factors and Legal factors. These are the factors that basically control the performance and operations of an organization.

Political factors : Here, the government, restrictions imposed by the government, and factors such as foreign trade policy, corruption, taxes, trade restrictions, etc.  play an important role on the organization. If there are any changes in these factors, the organization gets affected.

Economic factors : These factors include National income, economic growth, inflation rate, interest rate, disposable income, etc. in an economy. These factors have a vital role in determining how the people are going to react to the products/services offered by the company and whether they buy their products, given the economic factors of the country. Economic factors determine the demand, supply, etc. of the economy.

Social factors : In this case, factors such as demographic features, culture, median age, income distribution,etc of an economy affects the organization. Changes in these factors have a great impact on the organization in many ways, as these factors decide whether there is a huge demand for the particular goods from a large number of people, in a given economy.

Technological factors : The advancement and innovation in technologies affects an organization in a number of ways. It determines the cost effectiveness, profitibility, capacity of production, etc. in an organization, so if there is an advancement in these factors, the organization is impacted positively.

Environmental factors : Impact on the environment affects an organization significantly. Climatic changes, weather, etc. changes the demand and supply by the organization.

Legal factors : Different laws and regulations affect the organization and its operations. Different Acts and ammendments shape the future of an organization and changes in these laws affect the operations of an organization.