Seven Factors That Surround The Business Environment Externally/ physically
- Political Factors: This is in relationship to the law of the country that pertains to business, which if not followed will result in fines, e.g paying of taxes acquiring license for some goods e.t.c.
- Economic Factors: These are economic issues like interest rates, exchange rates, inflation and the economic cycle which affect the purchasing of raw materials, sourcing for financial assistance from the banks, paying salaries e.t.c.
- Social Factors: These are the societal factors that help an organisation to grow, it is the society that buys the product of the organisation to survive and to grow. The organization will need to supply goods at desirable prices, give fair remuneration to employees, give employment opportunities and fair return on investments of shareholders. The changes in society lifestyle and attitude, the change in size and distribution of the population, change in leisure time e.t.c affect the organisation.
- Technological Factors: The organisation need to keep up to date with the latest technological advancement in order to remain in competition. The organisation use machinery in production process which will make their product efficient and cheaper in produce.
- Environmental Factors: The organisation have to be more friendly with the environment by reducing noise from production unit, reducing wastage and pollution e.t.c.
- Competitive Factors: The competition with other producers affect business operation. The organisation will need to have a higher percentage of market shares of the product and be in control to continue to exist in the commodity market.
- Structural Factors: The smallness or largeness of the of the firm also matters. How big or small a firm is will determine the people buying goods or shares in that company. And this will also influence the fact of if a wholesaler, or a retailer or customer will be the buyer of that commodity. you
The Two Factors Affecting Business Environment
- Internal Factors
- External Factors
Internal Factors
These are those factors affecting business internally.
- Availability of finance because without money the organisation may not be able to do what they wish.
- The capability of the staff is the productivity of the organization.
- The information that are available to the organisation, the more effective the organisation can make better decisions.
- The quality and quantity of information technology available to the organisation which will affect the productivity of the organisation.
- The management skills of the employees.
- The changes in the cost of production, that is, increase in wages and raw materials can affect the profitability of the organisation.
