Business Environment and It's Impact

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The Business Environment and its impact

The internal environment - the business has control over its own internal environment, such as the state of the economy, government regulations, legal issues the number and strength of competitors and logical advances.

The external environment - the business has less control over the factors in its external environment, such as the state of the economy, governments regulations, legal issues, the number and strength of competitors and technological advances.

The factors that make up the business environment are not constant and certain. They are continually undergoing change and a business must keep ‘in tune’ with change and adapt its processes accordingly. Developments in the economy and society as a whole can sometimes affect an individual business and sometimes an entire industry.

Economic cycles are the periods of growth and recession that occur as a result of fluctuations in the general level of economic activity.

Characteristics of ‘boom’ periods are:
Higher levels of employment.
Inflation may increase.
Level of spending increases.
Wages increase.

Characteristics of ‘bust’ periods are:
Unemployment levels may rise.
Inflation may remain stable or fall.
Wages are less likely to raise.
Level of spending decreases.

One important factor to consider n terms of economic cycles is that not all businesses experience a downturn in revenue and sales during a recession; nor do they necessarily experience an upswing in trade during a ‘boom’ period.

A business must always be aware of the changing nature of consumer tastes. Consumers are influenced by a wide range of factors that affect the way they choose to spend their income. A business that targets its product or service to a niche market (A niche market is the breaking down of a market into smaller segments so that particular groups with certain characteristics are being targeted by businesses) must be especially conscious of changes in...
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