External Factors 

The Nature of External Factors 

Sometimes businesses have to deal with events and issues that are absolutely beyond their control. These can affect business unexpectedly and business needs to react to the way they operate. 

The different types of external factors. These are: 

• Political – For example, new legislation 
• Social – Changes in taste and fashion or the increase in spending power of one group, for example, older people 
• Technological – For example, being able to sell goods online or using automation in factories 
• Environmental – For example weather conditions affecting sales or production and growing interest in being ‘green’, for example by recycling 

Political Factors

Some parts of the world are politically unstable.

Vocabulary

• Unstable- likely to change suddenly and worsens 
• Pressure Groups – groups or organisations that try to influence the opinions of ordinary people and persuade the government to do something. 

Social Factors

Social factors are influenced by the people who use the business. Any changes in lifestyle, opinions or what consumers require can affect the success of a business. 

Some changes that have occurred in the recent years are:

• Increased consumer awareness – Consumers have higher expectations than ever before. They have easy access through the internet to lots of information about products. 
• Changing demand patterns – changes in society bring about changes in demand for products. 
• Increased numbers of women at work -More and more women in many countries have left the traditional role of childcare and have combined family life with jobs and businesses in charge. 
• More part-time workers – In many countries there has been a huge increase in the number of people taking on part-time work. 
• Urbanisation – Many people have left rural areas for towns and cities in some countries, such as Brazil, India and China. 

Technological Factors 

• Production has become more capital-intensive and costs are reduced.
  • Capital Intensive – use of relatively more machinery than labour in production. 
• In the Primary Sector – Agricultural costs were also lowered by the use of tractors, mechanical harvesters and automatic feeding systems. 
• In the Secondary Sector – the introduction of robots on production lines has reduced costs. 
• The use of technology in service industries has reduced costs. For example, Internet banking. The use of IT has helped to reduce administrative and communication costs in business. 
• The rate of technological change seems to increase all the time. Businesses usually welcome technological developments because they often provide new product opportunities or help improve efficiency. 

Environmental Factors 

There is a rise in environment damage 

Some examples are global warming (rise in temperature), habitat destruction, resource depletion (oil, gas, coal, minerals), and sustainable development. 

• Sustainable Development – idea that people should satisfy their basic needs and enjoy improved living standards without comprising that quality of life of future generations.