External EnvironmentThe external environment refers to the operating environment (or task) and also the macro (or broad) environment. This includes a range of broad and general factors which effect all businesses in one way or another. Anything which effects the business from an outside perspective is considered external.
Economic conditions
Prevailing economic conditions of the nation will have an effect on the spending patterns of citizens. Increases in interest rates and/or a high level of unemployment will depress consumption of non-essential goods and services. For example. when people experience financial hardship, they will spend less money. Economic conditions are global as well as national, and when there is a global financial crisis as in 2007, changes in the external environment can be dramatic. Technology
The change in technology can have a huge impact on the external environment of a business. In the last 50 years there has been a rapid growth in technology which constantly exerts pressure on a business or organisation. If the business is unable to adapt the change they will pose a serious risk of losing market shares. It's not just that technological change affects the design of products, but even the delivery of services can change. Media
The media is undergoing rapid and significant change. The main driver of this change is technology and the rise of the internet. Newspapers once carried many pages of job adverts but now this business is conducted by online recruitment companies such as Seek. This can impact the business as if the organisation in unable to use new technology to advertise their business and also jobs this will deeply impact them. |
Legal
Taxation is one of most obvious changes in law through legislation. Sometimes taxation changes occur overnight with little warning and sometimes there is plenty of time for the business to prepare. Other law changes that commonly affect business include Workplace Health and Safety, Industrial Relations or Consumer Protection and Environmental Law. Political
Like law, changes in government policy can be well notified and discussed, or without warning. As an example of how government policy has an effect, is that many organisations depend on government financial assistance. When there is a change of government, such funding assistance can disappear in a short space of time. |
Demographic
There is constant change in the make-up of the population. Some of these changes include an increasing proportion of elderly citizens, increasing number of two-income families, the age at which people marry is increasing, increasing ethnic diversity, suburbs which were once dominated by young families now have few. These demographic changes can have a significant effect locally. For example, a sport club which once prospered can begin to decline as the local area has less and less children.
There is constant change in the make-up of the population. Some of these changes include an increasing proportion of elderly citizens, increasing number of two-income families, the age at which people marry is increasing, increasing ethnic diversity, suburbs which were once dominated by young families now have few. These demographic changes can have a significant effect locally. For example, a sport club which once prospered can begin to decline as the local area has less and less children.