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Business - External Influences.

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Business - External Influences - Gautam Kumar Every business is part of an external network called the Environment. This network plays a large role in the way a business functions and is run. The effects of the environment on the business can be both a boon or a bane to the business. The External Environment in which a business operates can be categorically divided into various factors. A few that will be discussed here are : * Competition in the Market * Economic Environment * Political Environment * Population (Sociological Environment) * Ecological Environment * Technological Environment All these factors compose the External Environment. Every business needs to take all these factors into account when carrying out its operations because each one in its own way has a very real impact on the success of a business. However some businesses carry out the less comprehensive but still valuable PEST (Political, Economic, Sociological and Technological Environment) Analysis. Competition in the Market: On setting up and throughout the course of its existence, a business does constant research on the Market Structure of the market it operates within. This is the amount of competition that exists in a market. This is what determines the prices of the business' goods or services. ...read more.


Also economic growth policies generally conflict with anti-inflationary policies. Maximum output is generally at the cost of ecological resources. In such cases, both governments and various businesses must try to come up with an optimum solution. Population (Sociological Population): Statistics about the population of the region (city, country, etc) in which a business operates is vital for optimum outputs . Every developed business looks at these statistics regularly to spot trends and if needed, act on these trends to maximize outputs. Size - A greater population means more demand and potential sales of a firm's goods. It also means a greater labour pool. Migration - Immigration means the influx of people into a certain part of the world. From a business' standpoint, it means a greater market for people of a certain age, or from a certain country. For example, an influx of Chinese people in cities across the world is responsible for each 'China Town'. There is a much greater scope to sell Chinese products in China Towns than in other parts of a city. Emigration means that a certain amount of the previous population has now left the area and gone somewhere else. ...read more.


This improves interaction both within and between firms. Also, transport is faster with jet aircraft. This has had a TREMENDOUS effect on sales and productivity. Recruitment is made much easier through the reaches of the Net. A person in Bombay could do his work on the PC and e-mail it to Tokyo where his company is based. Unfortunately, the arrival of technology means that LOTS of jobs are made redundant. Job insecurity and de-motivation also take place. Finance - Globalisation of money markets through online bank transfers has increased speed, efficiency of payments and sales. Intra-firm and inter-firm transfers can be made, tracked and accepted instantaneously. Accounting has become a breeze (comparatively). Only training to use software is required. This has greatly increased productivity and efficiency. Therefore we see that a business is not a single, unattached entity, but a part of a vast, complex web which makes up the External Environment. The Business Cycle: The business cycle or economic cycle refers to the ups and downs seen somewhat simultaneously in most parts of an economy. They tend to repeat at fairly regular time intervals. The cycle involves shifts over time between periods of relatively rapid growth of output (recovery and prosperity), alternating with periods of relative stagnation or decline (contraction or recession). These fluctuations are often measured using the real gross domestic product (taking into account inflation). ...read more.

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