5 Factors that Influence Business Environment |
Posted: September 30, 2019 |
Whether you have a business in internet services, or wholesale goods; you must understand the external and internal factors affecting your business. It is extremely important to understand such factors since they can dictate the fate of your business. These factors are responsible for imposing various restrictions on any enterprise; such restrictions that can influence the industry and re-direct the company’s activities. Because of their crucial nature, it is recommended that you gain suitable information about these external and internal factors. Here is a list of five important factors that every enterprise owner should know about. Geographical or Natural FactorsGeographical and ecological factors influence the nature of the business. The industries and the businesses in any region need to assess the geographical factors before initiating business in any particular region. This is because what appeals to the people of one region may not appeal to the people of another region. The geographical factors also include the physical features, rainfall, humidity factor, and the climate of any region. Considering all these factors is crucial since it would allow entrepreneurs to establish industries that would cater to the needs or demands of people belonging to a particular region. The supply of raw material also needs to be considered as establishing a clothing industry in a region that does not have any required raw material would only add to the expenses. This is because the entrepreneurs would have to order the raw material from another region; thus incurring costs. Another factor is the natural or ecological factor that could hinder businesses from functioning properly. Every region has a fair share of natural resources such as oil, gas, water, and coal, etc. These natural resources were once thought to be limitless in supply. Only recently, did the scientists figure out that the Earth may run out of natural resources sooner than expected. In a bid to preserve the resources, many states, regions, and governmental bodies have started regulating and controlling the supply. So, if your enterprise or industry has to use the natural resources for conducting its daily functions, the business may face a few sanctions from the government. For this, you need to ensure that your business has all the right paperwork it needs to conduct business efficiently. Legal or Political FactorsPolitical or legal factors contribute to the success or failure of any enterprise. The laws and regulations are exercised by the government to protect the interest of the organizations. Also, they are in place to stop the enterprises from exploiting the interests of the common consumers. The legal rules and regulations in any region are created in a specific way as to ensure the region’s economic growth and to curb illegal practices by any international organization. So, before establishing a business in any international region, the entrepreneurs must get themselves familiarized with the local regional tax practices. Also, they must understand the regulatory measures and the legal factors that could affect their operations in the long run. To understand the legal and political factors and to adapt your business accordingly, you need to understand organizational law, contract law, consumer and employee protection laws, securities law, and laws regarding the unjustified termination of any employer/employee. Economic EnvironmentThe economic policies of any country influence the decision of any entrepreneur. Depending on the economic conditions, the entrepreneurs can decide whether a specific region is a good place for investment or not. Unfortunately, this is a complicated factor since the enterprises will not only have to analyze the economic conditions of any particular state. Instead, they will also have to look at the bilateral relations as well. With the world becoming a network of trade, the increased relations between different countries is always perceived as a good step for the economy. However, due to any political tension between two countries, various sanctions and trading limitations can be imposed on any country. Such scenarios would lead to severe disturbance in economic growth. The entrepreneurs need to consider such scenarios as well before starting any venture. The fear of sanctions may stop entrepreneurs from investing in third world countries. However, the greatest profit earning opportunities usually originate from under-developed or developing regions. This is because, in the emerging economies, the rate of investment and the income level are always steadily increasing. Thus, it provides businesses with bright prospects. Cultural or Social FactorsA business operates in society. Thus, the entrepreneurs should shape their policies in a way that is respectful to the society’s norms, culture, tradition, beliefs, and faith among many other factors. For enterprises willing to operate in a single region, the task of adapting their operations according to the societal/cultural factors is simple. However, this task is difficult for international chains since they have to promote their products/services in a way that pleases people belonging to different cultures. A business also needs to adapt to or consider external social factors as well. Otherwise, it will not survive the test of time. For instance, a change in how people view climate can influence the decisions of the entrepreneurs. That said, with all the climate change talks going on, any company still manufacturing cars that expel toxic fumes in the environment will be regarded as insensitive and vice versa. Considering this, businesses must understand the social behavior of the individuals and try to improve their operations accordingly. Technological EnvironmentTechnological advancements connect us as a society. They inform other people about the latest trends and simplify business operations to increase efficiency. Refusing to allow the technological environment to infiltrate your business model would drive your operations towards the brink of extinction. For example, if you are in the carpet cleaning business and do not have a web presence then a person in London who is searching for carpet cleaning London will never be able to find your business which in turn will lead to loss of potential customers. Considering this, the businesses need to be more accepting of the innovations since they can help in increasing the overall profits. The technological innovations have a noticeable influence on the business because they break down the physical barriers, connect the entrepreneurs with the common consumers, and allow their operations to be conducted efficiently. Although the technology has existed for a very long time, only recently the researchers were able to figure out its influence on economic development. The economic growth depends on the technological factors since the latter can convert difficult tasks into easily manageable ones. Any organization that benefits from technological innovations can reap a rich harvest. They can increase their profits and excel where other companies lag. ConclusionBefore initiating any business in the international or national market, it is important that the entrepreneurs identify and understand the business environment. It is extremely crucial since sound knowledge regarding the business environment can determine the success or failure of any enterprise. We have mentioned a few critical factors that you before could analyze implementing your business practices in any specific region. So, go through them and analyze the market to produce targeted and tailored policies for effective results.
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