The total of external and internal factors is known as the business environment. This factor influences business. It should be noted that both factors influence each other working environment for affecting the industry. For example, rules and regulation by the government is the external factor, but it controls the day-to-day running of the business internally. The set of rules made by the government affects the laws and regulations established by the business internally. The five environmental factors that are different from commercial companies are political, macroeconomic factors, social factors, microeconomic factors, and technological factors.
Political factors – political factors can be defined as the governmental accomplishments and political circumstances that may affect the business. The examples consist of laws, regulations, charges, and other trade obstacles, war, and communal turbulence. Political economy deals with the interdisciplinary branch of the social sciences, which focuses on the interrelations within individuals, governments, and public policy. This field studies how economic theories like capitalism, socialism, and communism work in the real world. In this concept, it can be considered that one seeks to understand the historical, cultural, and custom impact of an economic system. Various political variables that support or hinder economic development are the level of infrastructure, education, level of inward investment, levels of saving capital, and political stability. The most significant block of development is prolonged civil unrest or military conflict because it causes financing to dry up and resources to be wasted in unproductive means. The politics of sustainability and development are both central. Sustainability is about overcoming embedding the power relations at macro-scales, which is nation-state and international governance. This implies that sustainable developments are related to the political economy in every manner.
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Macroeconomic factors – Macroeconomic factors are dynamics that affect the entire economy, not just the business. The examples comprise of things like interest rates, redundancy rates, currency interchange rates, consumer self-assurance, consumer discretionary revenue, consumer savings rates, downturns, and despair. If a society does not have spending power then the consumer shall not be able to buy goods, which could lead to the failure of a business.
Social factor – these factors are related to the society in which the business has set-up. Social factors comprise of social movement such as environmental movements which is related to the change in consumer demand, such as a change in fashion or difference in the taste of consumers. For example, consumers are becoming more health-conscious, so indirectly, it increases the demand for organic foods and green construction. Plastics are being shunned due to the harmful impact on the business.
Microeconomic Factors – these are the factors that can affect the market in-demand size, market size, supply, suppliers’ relationship, and distribution chain as a retail store that aids in selling the product of the company, which directly or indirectly strengthen the business competition. For example when the government allows FDI then businesses have more money to invest which could lead to fuel in growth. Similarly, an increase in taxes on fuel could lead to a slowdown in sales of vehicles.
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Technological Factors – these are related to the innovation made in the technology sector to minimize human labor. It can benefit or detriment to the business. There are some technological advancements that aids in increasing output and earnings. Technological advancements can be a boon or a bane for any company. It might reduce the cost by cutting out manpower or it might lead to the downfall of a business. For example, automated production or computer software could significantly reduce the manpower input required, which could reduce the costs and the number of errors. On the other hand, some technical factors can create a threat to business; for example, internet streaming is a threat to DVD’s or film print rental business. Pagers ran out of business due to mobile penetration.
These are some of the factors that seriously affect any business. You too could add some pointers which we might have missed, we could add them in our revised article.