The Ultimate Guide to Business Environments and Their Factors

By on October 30, 2019

An environment is made up of different factors that are affecting it directly or indirectly. Therefore, a business environment is comprised of all external and internal factors that influence the different activities taking place within a business.

It is a fact that businesses cannot work independently. They must interact with the internal as well as the external environment to grow and prosper. Countless factors have an impact on the overall business environment. These factors can be categorized into external and internal factors.

The external factors are all those elements that are affecting any business and are not under the control of the business owner. They comprise the political/legal scenarios, economic conditions, technical advancements, global environment, demographic, and the competitive market.

In terms of businesses, an internal factor refers to anything within the company which has an impact on the business. These constitute both tangible and intangible elements within the internal environment. The factors can include stakeholders such as workers, entrepreneurs, and customers. Moreover, the strengths and weaknesses of a company are also part of the intangible internal factors that make up a business environment.

External Factors 

Below we have discussed some of the major external factors affecting a business environment.

  • Economic Factors

The major factors that affect a business in terms of the economy are the economic policies and the current market trends. All established businesses measure their progress against the market statistics. Any fluctuations in the market may affect any business negatively or positively. It is through different policies and practices which organizations adopt to help them withstand any economic crisis. Learning how to deal with certain economic factors like inflation, taxes, and recession can help you make your business stronger.

  • Political/Legal Situation

Stability and government laws play a big role in how day-to-day business operations are administered. Foreign investors are keen upon checking whether the country is politically stable before they invest. Moreover, making sure that the country is politically stable is part of the survey that multinational companies conduct before they locate a franchise or a plant. Before you start your business, you must conduct a due-diligence which will help you plan out your business in a more effective manner.

  • Social Factors

As a business owner, you may think that social factors may not influence business operations in any way. This is where most business owners are wrong. Social factors play a major role in the sale of your products or services. The social factors of a community such as values, ethics and the lifestyle of the people play a huge role in how a business grows in an area. Moreover, factors like the annual income and the role of women in the community also influence the way a business flourishes. Additionally, the organization culture is a product of the socio-economic condition of the country.

  • Influence of Technology 

With the widespread use of the internet and smart gadgets, there is an increase in how technology affects the business environment. Advancement in science and technology has led to greater efficiency and productivity in the working environment.

  • Effect of Technology on Operations: Technology has changed the entire dynamics of the way businesses function. They have transformed the way data is stored. Moreover, the advent of digital marketing has opened a whole new array of possibilities for businesses. They can smartly sell their products and services.
  • Effect of Technology on Customer Retention: Technology had without a doubt made systems more efficient. With the business operations running smoothly, there are more chances of improving customer care. Companies can retain customers and reduce customer defections.
  • Customer Satisfaction 

A business is of no use unless it is meeting the demands of its customers. This is the reason why customer satisfaction is known to be one of the most essential business factors. A good business is that in which the customers are satisfied. However, a great business is the one in which the company is tailoring the products/services according to the needs of the customers. The only way to identify the needs of the customers is through an established communication channel.

  • Competition 

Competition is inevitable in the world of business. Even if a company is offering a unique product or service. At some point, it will be competing with another business. Competition has hurt many businesses in the past. However, healthy competition can be seen as a pathway to innovation along with efficiency. The drive to become better than your competitors can have a positive impact on one’s business. However, if overdone it can leave the business damaged beyond repair.

Internal Factors

Just like the externalities that can affect a business. Certain factors within the business have an impact on the business too. These are termed as the internal factors. Let’s discuss some of them in detail.

  • Human Resources

Human Resources are the biggest asset within the company. They are the most prized possessions of any business. The best businesses are those who treat their employees with respect and dignity. A skilled and motivated task force is sometimes all that you need to expand your business into new horizons.

Employees must be given the environment which is conducive to their growth. Employees are most productive when they are working in a safe and hygienic working environment. Keeping the office environment clean is a great way to ensure that your employees are happy. If you are a growing business operating in London, you could contact any suitable carpet cleaning services to help you take care of your office mess.

  • Finances 

Unsurprisingly, finances play a huge role in determining the business environment. Adequate funds are necessary for any business to sustain itself. There are different ways businesses acquire their financial resources. However, it is important to be financially stable to grow and expand.

Conclusion 

As seen above, there are a couple of factors that play a role in determining the business environment. The key is to find out what works best for your business and use it in a way that can be advantageous for the growth of your business.

About Shawn Mike

Shawn Mike has been working with writing challenging clients for over five years. His educational background in the technical field and business studies has given him the edge to write on many topics. He occasionally writes blog articles for Dynamologic Solutions.
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