Download internal and external business environment

INTERNAL AND EXTERNAL
BUSINESS ENVIRONMENT
INTERNAL ENVIRONMENT
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These are factors from inside the firm that could
affect performance.
1. Finance Available – without money the firm may
not be able to do what they wish.
2. Ability of Staff – the more capable staff are the
more productive they will be.
3. Information Available – the better the
information the better the decisions made.
4. ICT Availability – this can influence the
quality and quantity of what is produced
5. Ability of Management – good managers
will make good decisions
6. Changes in Costs – increases in wages or
raw materials can affect the profitability of
the firm
EXTERNAL ENVIRONMENT
• This is summarised as:
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Political
Economic
Social
Technological
Environmental
Competitive
POLITICAL
• Laws passed in the UK and the EU can affect the
what a business does.
• E.g. shops are not allowed to sell alcohol on
Sunday mornings or the smoking ban in public
places.
• Failure to follow laws will result in fines.
• Other ways the government can influence is
through setting taxation rates and investment in
infrastructure.
ECONOMIC
• This includes changes in interest rates,
exchange rates, inflation and the economic
cycle.
• If interest rates are high this could stop
firms from borrowing money also
customers are less likely to borrow or use
credit cards to make purchases.
• If the pound is high against other currencies
this makes it hard to export goods abroad,
reducing the number of sales.
• If inflation is high, the prices of raw
materials can be expensive which can
reduce profits.
• If the economy is in recession, people tend
to be unemployed or worried about losing
their job, therefore not spending money on
luxury goods.
SOCIAL
• DEMOGRAPHIC CHANGES
• This is to do with the size and distribution of the
population of a country.
• E.g. The UK has an ageing population, this has led
to a rise in products aimed at older people
(SAGA) and firms recruiting older workers
(B&Q)
• SOCIO-CULTURAL CHANGES
• This is about changes in lifestyle and attitude.
• E.g. More women working has seen a rise in ready
meal and later opening hours
• More concern about the environment, forcing
firms to maybe use recycled products.
• People have more leisure time, changes in attitude
to single mothers have also affected the types of
products offered.
TECHNOLOGICAL
• Firms need to keep up-to-date with the latest
technology in order to remain competitive.
• Have seen a huge growth in e-commerce (buying
and selling online)
• Use of machinery in the production process –
more efficient and cheaper.
ENVIRONMENTAL
• Firms are aware that they have to be more
environmentally friendly, not only because
that is what customers want, but can be
forced by the government to do so.
• It can also include storms, floods, noise. All
these can affect how a business operates.
COMPETITIVE
• What the competition is doing can affect
how a business operates.
• Firms now not only face domestic
competition but also foreign.
• Have to keep up or be better than your
competition to keep your customers.