Question

Discuss five external environmental factors in the business environment that could have an impact on proposed business identified in question 1

Answer 1

The five external environmental factors are as below-

Economic environment= This is one of the most important factors that can have a direct impact on the proposed business. It includes the rate of inflation, the exchange rate of the currency, unemployment rate, and so on. These factors can hamper the growth of the business as these factors have a larger impact on the buying power of the customers.

Technological environment= This is related to the status of technological development in the country. The company has to match with the technology used by the competitor so that it can remain competitive with the other firms in terms of technology. Any improvement in the technology also requires the firm to adopt otherwise it will hamper it adversely.

Social environment= This includes cultural and social values and consumption pattern. It decides the types of services and products used by the customers in a certain society.

Legal environment= This is the policy and rules imposed by the government of the country. It mainly includes laws related to the business establishment, wage protection laws, human resource laws and so on that are needed to be followed by the company

Natural environment= It includes the ecological, geographical and topographical factors for instance, the raw material, natural resources, geographical location, weather and so on. These can have a direct impact on the business as availability of the favorable natural resources is quite significant for the business.