Chapter 3: Environmental Factors that Affect Local and International Business

Internal Environment

Factors that occur within the premises of an organization and direct affect the different functional areas in the organization.

Environmental Factors

These are the factors that affect the operation of business be it internal factors (within the business) or external factors (outside forces)

Weaknesses ​

These are the limited resources available in your company.

Social, Demographic, Political, Technological Factors

What are the Environmental Factors?

Economic and External Factors

What are the factors included in Macro environment?

Suppliers, Competitors, Marketing Intermediaries

What are the factors included in the Micro environment?

Value System, Mission and Objectives, Financial Factors, Internal Relationsip

What are the internal factors?

Environmental Scanning

A method used to analyze strategic plan of action and helps organizations to gain knowledge of possible influences from the outside environment that affect the business.

Internal Relationship

Amount of support the top management enjoys from its shareholders, employees and the board of directors also affects the smooth functioning of a business.

International Business

Business activities are carried outside the country.

Domestic/Local Business

Business operating in their own country and are affected by the economic, legal, and cultural factors specific to that nation.

Competitors

Close challengers of the business. It also refers to the numbers of similar competitive product brand, size, and market capitalizations.

Missions and Objectives

Different priorities, policies, and philosophies of a business are guided by the mission and vision of a business.

Economic Factors

Economic conditions such as growth rate, inflation, restrictive trade practices and others which have considerable impact on the business.

External Environment

Exist outside the firm and often regarded as uncontrollable factors.

External Factors

Exist outside the firm and often regarded as uncontrollable. These can be characterized as micro and macro environment.

Political Factors

Government policies, laws and legalities. This, in way, affects the business operation.

Organizational Environmental Scanning

Helps organizations to gain knowledge of possible influences from outside environments and how it can strategically affect the business. It is also a method of analyzing relevant gathered information and use them to determine strategic planning and planned action.

Value System

It denotes the culture and norms of the business. This is the regulatrory framework of a business whuch every employee must abide and act within context.

Marketing Intermediaries

It is a vital link between business and the consumers. This aid the company in promoting, selling, and distributing goods and services to its consumers.

Suppliers

People who are responsible for supplying necessary inputs to the organization and ensure the smooth flow of production.

Strength, Weaknesses, Opportunity, Threats

SWOT

Tecgnological Factors

Sets challenges for dealers. It affects the kind of product that a dealer is offering. You cannot stop the advancement of technology, but you can learn to adapt to its changes and maximize it for the advancement of the organixation.

Threats

These are the circumstances or situations which you cannot control.

Social Factors

Society together with its preferences, priorities, pattern of beliefs, purchasing power, educational background and others.

Demographic Factors

Study of people, such as their age, sex, marital status, occupation, family size etc. These are uncontrollable, enabling you to predict future trends and consumptions of your product.

Financial Factors

These are the factors like financial policies, financial position and capital structure which also affect a business performance and its strategies.

SWOT Analysis

The oldest popular method used for environmental Scanning.

Opportunities

These are chances for development, advances, or expansion.

Strength/s

These are the advantage of your company over the other.