Lecture 1-BE Business Environment (1)

7/28/2019 Lecture 1-BE Business Environment (1)

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External influences on the firm

The business environment


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There are six dimensions to

the business environment: 1. Political/legal factors

2. Economic factors:

The microeconomic environment

The macroeconomic environment

3. Social/cultural factors

4. Technological factors

5. Legal

6. Ethical & Ecological factors


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PESTLE ANALYSIS

The division of the factors affecting a

firm into Political, Economic, Social,

Technological, Legal and Ecological isknown as a PESTLE analysis.

This is widely used by business

enterprises to audit their environmentand to help them establish a strategic

approach to their business activities.


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Political/Legal Factors:

Firms will be directly affected by the

actions of government and other political

events. These might be major events affecting the whole of the

business community, such as collapse of communism,

War, or a change of government. Or may be actions

affecting just one part of the economy. Similarly,

businesses will be affected by the legal framework inwhich they operate. Such as industrial relations

legislations, product safety standards, regulations

governing pricing in the privatised industries and laws

preventing collusion between firms to keep prices up.


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Economic Factors

They can range from big to small, from

local to national to international, from

current to future; from the rising cost ofraw materials to the market entry of new

rivals, from the forthcoming Budget to

the instability of international exchangerates to the likely future cash flows from

a new product.


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Microeconomic Environment

This includes all the economic factors

that are specific to a particular firmoperating in its own particular market.


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Macroeconomic Environment

This is the national and international

economic situation in which business as a

whole operates. Businesses in general will do much better if

the economy is growing than if it is in

recession.

Government policies such as taxation,

interest rates and exchange rates will have a

major impact on firms.


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Social/cultural Factors

This includes social attitudes andvalues, such as attitudes towardsworking conditions, the length of theworking day, equal opportunities andthe use and abuse of animals andimages portrayed in advertising.

These trends have had a big impact onthe actions of business and the imagethat many firms seek to present.


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Technological Factors

They have a huge impact on the wayfirms produce products, but also on how

business is organised. The use ofrobots and other forms of computer-controlled production has changed thenature of work for many workers. It has

also created rapid communication and awide range of opportunities, many ofwhich are yet to be realised.


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Ethical and Ecological

Ethical considerations have become an

increasingly important influence on

business behaviour. One area where

this has been manifest is in the demand

for firms to act in a more socially

responsible way and to consider the

impact they might have on people, theircommunities and the natural

environment


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To be successful, a business will need

to adapt to these changes and if

possible take advantage of them.

Ultimately, the better businessmanagers understand the environment

in which they operate, the more likely

they are to be successful,either in

exploiting ever changing opportunities

or in avoiding potential opportunities.

Lecture 1-BE Business Environment (1)

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Transcript of Lecture 1-BE Business Environment (1)