Business environment is the sum total of all external and internal factors that influence a business. You should keep in mind that external factors and internal factors can influence each other and work together to affect a business. For example, a health and safety regulation is an external factor that influences the internal environment of business operations. Additionally, some external factors are beyond your control. These factors are often called external constraints.
Political factors are governmental activities and political conditions that may affect your business. Examples include laws, regulations, tariffs and other trade barriers, war, and social unrest. GST is a classic example of Political Factor affecting businesses in India.
Macroeconomic factors are factors that affect the entire economy, not just your business. Examples include things like interest rates, unemployment rates, currency exchange rates, consumer confidence, consumer discretionary income, consumer savings rates, recessions, and depressions.
Social factors are basically sociological factors related to general society and social relations that affect your business. Social factors include social movements, such as environmental movements, as well as changes in fashion and consumer preferences. For example, clothing fashions change with the season, and there is a current trend towards green construction and organic foods. That is why see Patanjali and others heavily promoting Ayurvedic and organic products.
Technological factors are technological innovations that can either benefit or hurt your business. Some technological innovations can increase your productivity and profit margins, such as computer software and automated production. On the other hand some technological innovations pose an existential threat to the business, such has Internet video streaming services challenging DVD business. Cloud Computing has made a huge impact on how businesses work today.
Organisational Culture is the framework of values, visions, and norms, and customs shared by the members of an organisation. Your business culture affects how the employees in your business interact with each other, its customers and other stakeholders. According to studies effects of positive or negative employee habits are huge on organisation’s growth and profitability.
Customers/Consumers are the most important component for an organisation. Organisations sell products to customers which help them to achieve growth and profitability. Organisations should continuously monitor the use of their goods and their acceptance by consumers to sustain a growth in the competition. This is were businesses use data mining to determine patterns and customer habits.
Microeconomic factors are factors that can affect your business, such as market size, demand, supply, relationships with suppliers and your distribution chain, such as retail stores that sell your products, and the number and strength of your competition.
Competitors are other business entities who compete for same resources and market. Competition provides the correct shape to business. Organisation should regularly analyse the competition in terms of Who are main competitors? What are their present strategies?