The External Environment
Unit 1 Exploring Business (International Specification). Resources for BTEC Level 3 Business Studies
The external environment is the environment that exists outside of the business. It cannot control the factors in the external environment but should continually investigate and respond to them. The external environment consists of a range of factors including;
The political environment
The economic environment
The social environment
Technological environment
The legal environment
The ethical environment
Political factors refer to the influence of the government in a country. Factors may be contraints or support put in place by the government to meet their objectives.
Government policy
Political stability
Tax
Industry regulations
Global trade agrrements/restrictions
War
Economic factors are any external influences that can affect the financial status and decision-making of a business and its stakeholders.
Exchange rates
Monetary policy
Fiscal policy
Supply-side policy
Stage in the economic cycle
Inflation
Unemployment
Balance of payments
Social factors refer to the ways in which people live or the values of people in a community in which a business operates.
Attitudes towards saving and debt.
Attitudes towards social responsibility
Consumer tastes, trends and fashions.
Consumer buying habits
Population demographic changes such as birth rates and migration.
Career attitudes
Work-life balance
Technological factors are the availability and development of equipment that a business and its stakeholders have access to.
Automation and robotics
Communications infrastructure
Technological life cycle (innovation - obsolescence)
Access to and quality of the internet
CAD/CAM
AI
Security
Legal factors are guidelines set out by the government that outline how businesses and their stakeholders must operate. This includes activity that must occur, activity that must not occur and the expected ways in which activity must occur.
Employment law
Common law
Local labour law
Health and safety regulations
Data Protection legislation
Competition regulation
Ethical factors are the moral beliefs and values held by the external stakeholders of a business.
Customer expectations of honesty in advertising
Customer expectations of Ethical supply chain management
Supplier expectations of timely payment
Fair trade opportunities
CSR activity of competitors
Opportunities to protect the environment.
Pressure groups
