External Environment

KEVIN
Jessie
Kelvine
Yang
External Environment
External environment refer to a bunch of variables or conditions that are exterior the organization but
influence it in some extent.
The external environment impacts on businesses and is comprised of many factors.
These factors are often used by businesses to analyse how and why they will besuccessful or
unsuccessful – this analysis is known as ‘PESTLE’ which stands
for:P:political,E:Economic,S:Social,T:Technological,L:legal and E:Environment
Business environment is the sum total of all external and internal factors that influence a business.
You should keep in mind that external factors and internal factors can influence each other and work
together to affect a business.
Political Environment
Political envitonment of the business are the politial factors that can affect the way in which
business operate.
Political factors on business environment
Political stability.lack of political stability in a country affects business operations.this is especially
true for the companies which operation internationally.
Wars also affect the business environment because many stores are destroyed and the owners
obviously face losses because reconstruction is expensive.
Fiscal policy
The use of taxation and spending by the government to
affect the economy is known as fiscal policy. Fiscal policy
is often used by governments to encourage strong, long-
term growth and to lower poverty. There are two kinds of
fiscal policies;
Expansionary fiscal policy: Taxes are decreased during a
period of expansionary fiscal policy, which may increase
business profitability.
Contractionary fiscal policy: contractionary fiscal policy, on
the other hand, calls for more taxes and decreased spending.
This directly affects a company's bottom line.
Monetary Policies
Monetary policy: it is a demand-side economic strategy that involves controlling the
money supply and interest rate and is employed by a nation's government to achieve
macroeconomic goals including inflation, consumption, growth, and liquidity. There are
two kinds of monetary policy;
Expansionary monetary policy: An expansionary monetary policy lowers borrowing
costs. As a result, individuals tend to spend more money, and firms are urged to increase
their capital expenditures.
Contractionary monetary policy: A rise in unemployment results from contractionary
monetary policy. Companies are hiring fewer people as a result of the downturn in the
economy and decreased production. As a result, the economy experiences higher
unemployment and businesses face lower profits because of lowered consumer spendings.
supply side policy
Supply-side policy: Supply side policies aimed at boosting the economy's efficiency and
production. The goal of supply-side policies is to enhance overall supply in order to raise
production.
Because of improvements in productivity and efficiency in the labour and product markets, supply
side policies aid in reducing inflationary pressure over the long term. Through their positive impact
on labour productivity and competitiveness, they can also help make real jobs and sustainable
growth.
Economic environment
Economic Environment refers to all those economic factors e.g inflation which habe a bearing
on fuctioning of the business.Business depends on the economica environment for all needed
input.
Economic factors include;
Inflation.Rise in price measured a standard level of
purchasing power which results when aggregate deman
grows faster than aggregate supply.it affects the cost of living
as the rising prices makes it more difficult for consumers to
buy products unless their income rises at same
pace.customers do not effectively plan long term investments
to incetives to save
Social factors
Social factors.Social factors represent another vital set of
impacts on shopper behavior.social factors influences
forexample the peer pressure groups affects the youth instead
of buying the products and ervices needed they go and buy
drugs and alcohol by doing this they do it for conformity(an
act of following the majority in order to be accepted in the
group of pressure) which is not good.
Technological Change
Technological factors.it affects well the
business because of the E-commerce(buying
of goods and toys online) business uses
this.there are businesses with have a website
where every client or a person can access and
buy and pay and they take it to his/her
location.
Legal Environment
Legal environment.this highly affected the activities of
a business. If the legal environment runs properly, the
business can touch its actual profitability point. The
external investors feel secure if the market properly
follows the business ethics. The legal environment is
one of the major things to attract foreign
investors.forexample the consumer protection law
where a business cant change the prices without the
clients informed like UK
Environmental Factors
Environmental factors.changes in climate can
affect the business for example if there is
floods people can’t get out of their homes
because there is no way to get to the shops
incase storms can even destroy stores of
businesses which can take much money to
recover the incident or for reconstruction.
Ethical Trends
Ethical trends: A reputation for upstanding ethics encourages more
prospective clients, consumers, and business partners to
collaborate with the business. Over time, it also increases
customer loyalty, resulting in a base of devoted clients who are
more inclined to recommend your company to others. However,
ethic trends may hurt a business because they will frequently pay
more to operate ethically. This is because purchasing materials
from ethical sources is frequently more expensive. Some
companies contend that this would decrease their ability to
compete, which would result in lower sales and profit margins.
THANK YOU

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