Question

Select two businesses that you are familiar with; identify the major elements of their external environments that are most likely to affect them in important and meaningful ways.

(NO STARBUCKS and Tim Hortan)

Answer 1

Two business affected from external environment is

1 - Manufacturing

If you have decided to open your business, it is important that you are aware of external factors affecting manufacturing business.

These factors can influence the generation of income of your business which can possibly lead to its demise.

Social Factors

One of the external factors that affect the business is social. This includes the social cost and benefits, the lifestyle and the demographics. In other words, this factor is more on the preference of your own customers. Make sure that if you plan to open and manufacture products, these should be according to the demands of your customers. This way, you can get a chance to earn even higher income than what you expect. You can conduct a survey regarding the possible needs of your customers in relation to social factors. This helps a lot in overcoming the effects of this factor.

Economic Factors

Aside from social factor, another thing that affects the manufacturing of your business is economic factors. This is basically the present economic condition and the cost of living of your target customers. Once there are sudden economic changes that might appear, this might limit the manufacturing efficiency of your business due to lack of demand. So before you open your business and manufacture the products you offer, take time to assess the demands of your customers. The higher the demand, the more promising the manufacturing of your business is. Thus, you can get higher profits.

Technological Factors

Technology plays a vital role in the decisions and options of customers. This is especially applicable for businesses manufacturing devices and other technological products. Once there are new gadgets produced in the market, people will go crazy to purchase these stuffs. The end result is that those gadgets produced in the past months are no longer in demand. So if you are in manufacturing business, make sure to continuously innovate or enhance your own products to live up to the expectations of your customers. This is also applicable for people who are planning to open other kinds of businesses.

Pressure Groups

There is also untoward effects coming from pressure groups that can affect the manufacturing efficiency of the business. What these pressure groups do is that they try to make bad publicity to the business they want even if these issues are yet to be proven. Since this can already affect the name of the company, chances are there will be lesser demand from customers. Therefore, this easily affects the profit that establishments can obtain the products they have manufactured. It is important that you should establish your own credibility and ensure the quality of your products better to withstand the bad publicity from pressure groups.

2 - E - Commerce

Factors Affecting E-commerce –

• Technological Factors – State of telecommunication infrastructure. ...
• Political Factors – Number and type of government initiatives to support use and development of modern technology. ...
• Social Factors – Literacy level of the people and penetration rate of PC`s. ...
• Economic Factors –economic growth of organisations

We can organize the external forces that affect business into the following six categories:

• Economic environment.
• Legal environment.
• Competitive environment.
• Technological environment.
• Social environment.
• Global environment.