Title: Top 8 External Factors Affecting Business Environment
Headings: Top 8 External Factors Affecting Business Environment
Top 8 External Factors Affecting Business Environment
In this article we will discuss about the top eight external factors affecting business environment. This article will further help you to learn about:
Top 8 External Factors Affecting Business Environment:
External Environment Factor Affecting Business # 1. Economic Environment:
1. Rate of Inflation:
2. Exchange Rate Fluctuations:
3. Ups and Downs in Economic Cycle:
4. Dynamic Changes in Economic Activity within a Country:
External Environment Factor Affecting Business # 2. Social and Cultural Environment:
Let’s examine these factors in greater detail:
1. Demographic Factors:
2. Labour Mobility:
3. Cultural/Actors:
4. Religious, Ethical and Moral/Actors:
External Environment Factor Affecting Business # 3. Political Environment:
External Environment Factor Affecting Business # 4. Legal Environment:
External Environment Factor Affecting Business # 5. Technological Environment:
Impact of Technology on Business Operations:
External Environment Factor Affecting Business # 6. Natural Environment:
External Environment Factor Affecting Business # 7. International Environment:
External Environment Factor Affecting Business # 8. Task/Competitive/Operating Environment:
Important elements in the task environment of an organisation typically include:
1. Clients:
2. Competitors:
3. Suppliers:
4. Labour:
5. Regulators:
Factors Affecting Business Environment:
1. Political and Legal Environment:
The political and legal factors that influence the business firms and industry are:
2. Economic Environment:
The economic variables that impact the business and industry include:
3. Socio-Cultural and Demographic Environment:
4. Technological Environment:
Factors Affecting Business Environment (5 Dimensions):
The business environment accordingly consists of five dimensions or components namely, economic, social, technological, political and legal factors, discussed in the following sub-sections:
1. Economic Environment:
Economic environment can be further categorised into Economic conditions; Economic policies and Economic systems, discussed as follows:
(i) Economic Conditions:
(ii) Economic Policies:
(iii) Economic Systems:
2. Political Environment:
Political environment includes factors like:
3. Technological Environment:
Technological environment can be shaped and developed in terms of the following factors:
4. Legal Environment:
Components of legal environment that influence a business include:
5. Socio-Cultural Environment:
Thus, factors under socio-cultural environment include:
External Factors Affecting Business Environment:
1. Political Forces:
2. Economic Forces:
3. Social-Cultural Forces:
4. Technological Forces:
5. Demographic Forces:
6. Ecological:
7. Competitive Forces:
8. Legal Forces:
9. International:
Table of Contents

Content: Dynamic Changes in Economic Activity within a Country: Additionally, firms have to understand whether changes in the economy are temporary or whether they represent longer term structural changes. Structural changes are changes that significantly affect the dynamics of economic activity now and into the future. The shift from an agrarian economy to an industrial economy and then from an industrial economy to a service economy were all structural changes that have enveloped most developed nations in the world. ( Hitt et al) “They affected where people worked, what work they did, and the education level they needed to do the work and so on. If structural changes are taking place and you are unaware of them, you can easily make poor managerial decisions”
ADVERTISEMENTS: Understanding the dynamics of global markets, developing appropriate strategies to move in line with changes in the domestic as well as global economies—keeping track of currency movements, interest rates, rate of inflation, cyclical nature of industry in which the firm operates, the growth rate of a particular nation etc.—is one of the toughest challenges confronting global managers. In the new global mar­ketplace, managers are required to play challenging roles and create a competitive advantage for the firm through people-friendly policies and practices. External Environment Factor Affecting Business # 2. Social and Cultural Environment: