The External Environments Of Business

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Technological Environment

- All the ways by which firms create value for the constituents: -- Human knowledge -- Work methods -- Physical equipment -- Electronics and telecommunications -- Various business activity processing systems

External Environment

- Everything outside an organization's boundaries that might affect it -- The domestic business environment -- The global business environment -- The technological environment -- The political-legal environment -- The sociocultural environment -- The economic environment

Sociocultural Environment

- The customs, mores, values and demographic characteristics of the society in which an organization functions - Sociocultural processes determine the goods, services, and standards of business conduct a society is likely to accept.

Domestic Business Environment

- The environment in which a firm conducts its operations and derives its revenues by: -- seeking to be close to its customers -- Establishing strong relationships with its suppliers -- Distinguishing itself from its competitors

Global Business Environment

- The international forces that affect a business: -- International trade agreements -- International economic conditions -- Political unrest -- International market opportunities -- Suppliers -- Cultures -- Competitors -- Currency values

Political-Legal Enviroment

- The regulatory relationship between business and the government (legal system) and its agencies that define what organizations can and can't do: -- Product identification laws -- Local zoning requirements -- Advertising practices -- Safety and health considerations -- Acceptable standards of business conduct - Pro- or anti-business sentiment in government and political stability are also important considerations, especially for international firms.

Economic Environment

- The relevant conditions that exist in the economic system in which a company operates - Examples: -- If an economy is doing well enough that most people have jobs, a growing company may find it necessary to pay higher wages and offer more benefits in order to attract workers from other companies. -- If many people in an economy are looking for jobs, a firm may be able to pay less and offer fewer benefits.


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