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An Analysis of the External Environment

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Submitted By EkaterinaChe
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An analysis of the external environment

Introduction The external environment in a business set up consists of the factors outside the organization but still affect its smooth running either positively or negatively. External factors of the environment are divided into two parts namely: directly interactive forces and indirectly interactive forces. The directly interactive forces includes: owners, customers, suppliers, competitors, employees and employees union. The indirect interactive forces includes: socio cultural, political legal, technological, economic and global influences. External factors are the deep internal analysis of the environment. These factors are further grouped into two categories i.e. opportunities and threats. Opportunities are the chances that exist within the external environment and whether the organization wants to exploit them or not. The threats are four factors that threaten the smooth operation of the company.

Current and Future External Factors Affecting Business Environment

According to (Nebblet, p4), the external environment variables play a role in determining the opportunities and threats a firm faces are twofold. Variables originating beyond a single firm’s are operating situation and variables influencing a firm’s competitive situation. The two sets provide challenges faced by a particular firm in attempting to acquire or attract resources. These two variables are discussed below:

• Economic: This reflects on the worldwide financial conditions. Some of these conditions include interest rates, inflation rates, unemployment rates and gross national product.

• Political: They include regulatory parameters within which an organization must operate. These regulatory parameters may include tax policies, trade regulation, and minimum wage legislation, social and technological factors.

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