Environmental Factors- Internal

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Advanced Diploma Business Management


Assignment topic:

Its clear that environmental factors- internal, market and external- may have a significant impact on the organisation Envinronmental analysis is concerned with identifying how the various factors interact with an organisation. Discuss the key factors in the general external evironment

Name: Nguyen Thi Thu Van

The usual way of analysing the general external environment is to consider the key factors under four headings, characterised by the acronym PEST.
. Political/ Legal environment
. Economic environment
. Social environment
. Technological environment.
The political environment includes all laws, government agencies, and lobbying groups that influence or restrict individuals or organizations in the society. The technological environment consists of those forces that affect the technology and which can create new products, new markets, and new marketing opportunities. All outside factors that may affect an organization make up the external evironment .

The keys factors in the general external environment:
1. Political/ Legal Environment:
The political environment within which an organisation exists has far-reaching consequences. Governments, through their legislative powers, determine the legal and regulatory framework applying to business and the public sector. They also give direction to a country through the way in which they exert control over the economy. The political environment most obviously operates at national level, but may also be significant at local and international levels.

The Political/ Legal Environment includes: Existing legislation in the home market, Future legislation, European/international legislation, Regulatory bodies and processes, Environmental regulations, Employment law ,Industry-specific regulations, competitive regulations, etc.

2. Economic Environment:
The major impact of the economy may be felt in the availability – and hence, the price – of the factors of production. Land, labour and capital (in the form of new funds) will vary with the state of the economy and this will be reflected in a wide variety of indices such as level of demand, interest and exchange rates, prices, wages, level of competition, etc. When an economy is growing, funds tend to be widely available, interest rate will be low and demand high, although labour and natural resource may be scarce and hence more expensive. In times of recession, the opposite tends to be the case.

A major factor in the international environment is the establishment of the Euro and how this is impacting on the economies of both those in the Euro zone and, importantly for the UK, those outside it. This may have implications at the national level, particularly in respect of inward investment.

3. Social Environment:
Social change involves changes in the nature and norms of society. In particular, organisation needs to understand the trends in demographics and the cultural environment. a) Demographic Change: is the study of population dynamics, which has wide implications for both the nature of the workforce and the markets for goods and services. Key demographic factors are: The rate of growth or decline in population, changes in the density of people in particular regions, changes in the wealth of people, changes in the ethnic structure of an area, changes in household and family structures, changes in employment patterns and changes in the age structure, locally or nationally. b) Cultural Environment: the concept of culture can be difficult to define, but generally it incorporates aspects of peoples’ beliefs and values, behaviour and thought patterns. Sometimes there are visible signs of culture, such as a style of dress, the adoption of rituals, ceremonies, etc. In 1980,...
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