What Are The Environmental Factors That Affect Business?

There are various environmental factors which can impact the businesses in an economy. These environmental factors can be categorized into external and internal environment of the businesses. The internal environment of the company includes the factors which are within the company and under the control of company like product Organizational culture, Leadership, and Manufacturing(quality). On the other hand, the external factors are not under the control of the company and include Social environment, political conditions, suppliers, competitors of the company, Government regulations and policies, accounting agencies like Accounting standard board, Resources in an economy and demographics of people.

1.) Social
2.) Political
3.) Financial
4.) QoS
5.) Product Quality
6.) Distribution Channels
7.) Promotional Channels
8.) Manufacturing
9.) Employee
10.) Leadership

Environmental factors affecting sales

Political factors. These refer to government policy such as the degree of intervention in the economy. What goods and services does a government want to provide? To what extent does it believe in subsidising firms? What are its priorities in terms of business support? Political decisions can impact on many vital areas for business such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system.
Economic factors. These include interest rates, taxation changes, economic growth, inflation and exchange rates. For example:
•higher interest rates may deter investment because it costs more to borrow
•a strong currency may make exporting more difficult because it may raise the price in terms of foreign currency
•inflation may provoke higher wage demands from employees and raise costs
•higher national income growth may boost demand for a firm's products
•Social factors. Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. In the UK, for example, the population has been ageing. This has increased the costs for firms who are committed to pension payments for their employees because their staff are living longer. It also means some firms such as Asda have started to recruit older employees to tap into this growing labour pool. The ageing population also has impact on demand: For example, demand for sheltered accommodation and medicines has increased whereas demand for toys is falling.
•Technological factors: New technologies create new products and new processes. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology. Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organisations providing the products.