EXTERNAL ENVIRONMENT OF BUSINESS

External environment factors are elements that exist outside of a company's internal environment that can affect a company's operations. These outside forces can help the business or present challenges to its current processes.

1. EXTERNAL ENVIRONMENT OF BUSINESS

2. BUSINESS ENVIRONMENT Business environment means all those internal and external factors which have an effect on the functioning of the business. These factors make opportunities and threats to the business

3. EXTERNAL ENVIRONMENT The external environment of a business involves all external forces effecting the functioning of the business over which the organisation has no direct control All businesses are impacted by their external environment. Sometimes a business has to act upon and react to what happens outside of the scope of its operations.  These external influences are known as  external factors. Multiple different factors can influence a business's external environment. These factors are often unpredictable and can change suddenly .

4. TYPES OF EXTERNAL ENVIRONMENT The external environment can be broken down into two types they are; Micro Environment Macro Environment EXTERNAL ENVIRONMENT

5. MICRO ENVIRONMENT Micro environment of a business is a combination of factors or elements in a firm’s immediate environment, which affect it’s performance and decision making. It is specific to a business . It is the immediate location or sector in which it operates . DEFINITION “ The micro environment consist of the factors of the company’s immediate environment that effect the performance of the company.” - Philip Kotler

6. Suppliers : These are the organisations and individuals who supply the inputs like raw materials and components to the business enterprises. It is very risky to depend on a single supplier because a strike, lockout, shortage or any other supply problem may seriously affect the company. Customers Customers are the king of the market. A company may have different categories of customers like individuals, households, industries, other commercial establishments ,government and other institutions . An in depth study of customer preferences, tastes and behaviours should be made by the firm.

7. Competitors Competitors are rival firms who compete with the organisations in market and resources as well . Every company should consider the competitors while deciding their business strategy. Marketing Intermediaries These are the firms which act as intermediary between company and customers. “ Those firms that aid the company in promoting , selling and distributing its goods to final buyers is called as marketing intermediaries” - Philip Kotler Public Any group that has an actual or potential interest in or impact on an organisations ability to achieve its objectives. The environmentalists, consumer protection groups, media persons and local people are some of the well-known examples of publics.

8. MACRO ENVIRONMENT These are the factors or conditions which are general to all business and are uncontrollable. Because of the uncontrollable nature of macro forces, a firm needs to adjust or adapt to these external forces. These are as follows ; Political Economic Socio-cultural Technological Legal Demographic Natural

9. Political Environment Political environment for a business refers to the political conditions and situations in which businesses operates. It is the state , Govt and its institution and legislations and public and private stakeholders who operates and interact with or influence the system. Economic Environment It refers to all the external economic factors that influence buying habits of consumers and businesses and therefore affect the performance of a company. Examples; GDP, Interest rates ,inflation and taxation

10. Socio – cultural Environment Socio – cultural environment refers to trends and developments in changes in attitudes , behaviour and values in the society. It includes social relationship, culture , customs and belief prevailing in the society. Technological Environment It refers to external factors in technology that impact business operation. These are the methods , techniques , and approaches adopted for production of goods and services and its distribution.

11. Legal Environment Laws related to the functioning of the business It includes the laws passed by the Govt. as well as decisions rendered by various commissions , court and other agencies. Natural Environment It consist of geographical ecological factors like climate conditions which effect working of business . Demographic It refers to human population characteristics that surround a firm or nation. Example ; age , gender , education level.

12. THANK YOU