management systems in order to generate huge sums of money to offer housing, healthcare,
and basic necessities such as food and clean water.
Introduction - Business Environment
Business environment is the sum total of all external and internal factors that influence a
business. The external environment consists of economic, political and legal, demographic,
social, competitive, global, and technological sectors. On the other hand, the internal
environment includes corporate culture, CSR and Ethics. As of today, business is that of a buyer
market that induces focus on technological, political and social changes.
External environment
External environments are factors outside the business that influences and impacts the way the
business operators. The business must act upon these factors in order to keep up its flow of
operation. Furthermore, external environments are factors outside the company that affect the
company's ability to function and have a significant impact on the business survival and growth.
Moreover external environments can be broken down into two types: the micro environment
and the macro environment. The micro environment are factors that directly impact the
operation of the company, these factors include the suppliers, customers, marketing
intermediaries, financiers and public perceptions. On the other hand, macro environments are
general factors that the business has little to no control over its environment, where the
business needs to constantly monitor and adapt to these external changes. Therefore it’s
essential for businesses to keep a close watch on everything that goes within the business. In
order to do this business do PESTEL analysis which enables them to understand the most
important factors of the environment in which the business is operating, and the opportunities
and threats that are within it? By understanding the external environments businesses can take
analysis and understand how it should operate on its daily basis in order to keep a constant
workflow outside the business. Moreover, by understanding the environment, businesses can
take advantage of the opportunities and minimise potential problems from occurring. For
example, monitoring suppliers to ensure that the goods or raw materials are delivered on time
to sell to consumers, if failed to do so the business fails to operate its services or goods to
consumers, impacting the business environment. Macro factors include Demographic,
Economic, Political, Ecological, Socio-Cultural, and Technological forces. Ultimately the success
of the company depends on its ability to adapt to these external changes in order to retain the
business flow of operation.
,There are several external environmental factors that might have an impact on a firm. As a
result, a company may seek to investigate these factors. The primary goal of this research is to
make better selections for the advancement of the firm. PESTEL analysis refers to the political,
economic, social, technological, environmental, and legal factors that I would examine.
Political factor
Political factors are activities that involve the decision, laws and regulations that the
government makes that affects the business operations and has the potential to change or
influence the business as a whole. They have the potential to have an impact on a company's
capacity to be profitable and successful. New laws, such as the national minimum wage, and tax
rates, such as VAT or Corporation Tax, are examples of political influences that affect
companies. New legislation is an example of a political factor since it can have an influence on
the company's operations by forcing regulations or banning it to operate in a certain way which
can ultimately affect the business environment on how it operates.
Political factors such as government support, such as grants or advertising, can encourage a
new company with ideas and help, give knowledge and suggestions in which small businesses
can get off to a successful start. Even while grants are only for a limited time, they may give a
start-up organisation with significant awareness and opportunity to succeed such as finding
targeted audiences, building loyal consumers etc…, which can enable them to achieve their
long-term success. Moving forward, membership in trade communities can lead to increased
living standards and a higher quality of life. For example, beautiful scenery, wealthy and big
buildings, and natural resorts can attract tourists, which will aid the UK economy to generate
increased income. The UK can focus on strengthening infrastructure in order to attract more
tourists. Another prime example is healthcare. This is where all residents in the UK are entitled
to free healthcare via the NHS; this is a membership that benefits residents with low income
because they may not have the financial means to pay for basic healthcare, which can reduce
the quality of life, resulting in more people dying sooner than expected. The NHS, on the other
hand, provides free healthcare to all residents of the UK which enables higher life expectancy.
Therefore leading to better quality of life.
Political factors, such as European Union legislation, can have an influence on businesses. Every
country that is a member of the European Union can benefit from trade benefits. For example,
increased market size which enables free movement of goods and services policies in the EU
enable businesses to export any items with no or little restrictions. Moreover Businesses can
benefit from the EU such as lower cost to trade, meaning when a business sends their goods
, and services abroad a country which is a member of the EU, they are no additional payments
that have to be made which then compared to normal transport of goods and services costs
Economic Factors
Economic factors are factors caused by the performance of an economy that have a direct
impact on a business and have large and long-term effects. Furthermore Economic factors
greatly influence the success of businesses. An increase in any economy's inflation rate, for
example, would alter how businesses price their products and services. It would have an impact
on a consumer's buying rate, and shift the demand/supply models for that economy. Inflation,
interest rates, foreign exchange rates, economic growth patterns, and other economic factors
are examples of economic factors. For example if inflation rises this makes less occupied as the
money for the goods and services have increased, meaning you are getting the same product as
before but now it’s worth more money which can influence consumers to be less engaged
leading to less sales profit for the business.
Economic factors such as Fiscal policy is where the government adjusts its spending levels and
tax rates to monitor and influence a nation's economy. It is run by the government in which
they set tax rates depending on the cost of borrowing. This is how the government collects
revenue and determines its budget. Changes in fiscal policy cannot be ignored by any business
owner or decision makers, as it can impact the business overall profit.
Monetary policy impacts interest rates by determining the amount and rate of increase of the
money supply. Government organisations, such as the Bank of England, are responsible for
monitoring economic issues and have the right to implement new interest rates and other
legislation that may have an influence on other businesses. Furthermore monetary policy
affects the general public in which the Bank of England places decisions on how they should set
interest rates, so the economy is well balanced. If people are buying too much, the interest rate
goes higher which means prices for goods and services are greater than what they used to be,
which leads to less buying which results in inflation decreasing. However if people are not
buying goods and services this would mean interest rate would decrease leading to more
buying and less saving which result in inflation to increase.
Economic growth is defined as the rise in the inflation-adjusted market value of an economy's
products and services over time. Economic growth is essential for businesses to grow and
succeed. It is related to the overall increase of the economy's production. Productivity and
investment are critical to economic growth: utilising existing resources more effectively and
investing in new resources. Success in this process provides higher incomes, which in turn fuels
