Meddling government red tape, surly workers doing substandard work and accidents at an all-time high? There may be something wrong with the environment in which you do business. There are a huge range of things that can influence the way your business is conducted, from the temperature in your office to changes in customer demand. And, in an ever more interconnected world, events in countries far, far away can have a huge repercussion on the bottom line.
Generally, the modern Business Environment can be divided into two parts. Internal factors are ones that a company has some control over, such as what products to manufacture or who to do business with. External factors, on the other hand, are typically things a company can’t control, such as the price of materials, Government Llegislation and unexpected events, such as disasters or economic shocks like the banking crisis of 2008.
External Factors
Unless you’re a really big company, there probably isn’t much room to change external factors directly. Smaller companies will lack the resources to lobby for change at the governmental level, though there may be some leeway in negotiating prices from suppliers. Some other external factors than can impact a business include:
Political
As already mentioned, government legislation can seriously impact on the operation of a business. Everything from international trade policies to tax levels can change with the political wind. It can be even worse if your company has clients abroad, as European cheesemakers selling to the Russian market have learned in recent months .
Social
Social trends can be an impetus for change in business. Everything from environmental pressure groups to simple changes in preference can require companies to adapt. It is, for example, increasingly seen as necessary for companies to give back to the local area in which they operate through charitable activities.
Competition
Uncommon and fortunate is the business that does not boast any serious competition. For most, keeping an eye on the developments and changes of other companies in the same sector is nearly as important as dealing with their own. Customer loyalty only goes so far and more than one company has hubristically allowed a younger start up to establish, and then overtake them by failing to innovate when needed.
Economic
On both the macro and micro levels, the economy can affect the environment of a business. On the macro scale, a recession may make it harder to win sales but provide opportunities to expand cheaply. On the micro level partnerships with other companies and spending trends amongst customers must be kept track of.
Technological
Technology is a two edged sword. On the one hand, offices have seen incredible increases in efficiency thanks to the development of computers. Video conferencing removes the expensive need to send representatives abroad in many cases and better transport links make it more affordable when they do. However, progress can also be an existential threat for many industries. Many may simply become uncompetitive globally as the work can be done far cheaper in developing countries by, for example, outsourcing to factories in China. Other industries may face complete extinction, as happened to video rental company Blockbuster, once a high-street name but now replaced by new internet video technologies.
Internal Factors
There are also a huge range of internal factors that can affect the business. Everything from staff morale to company policy to manufacturing capacity impacts on the overall environment of the Business. However, in most cases change is within the means of the company if it is necessary.
