9 External Environment Factors Affecting Business

Amidst the many troubles blazing against the survival of businesses today, here are some of the 9 external environment factors affecting business which we can’t but pay attention to in order to keep our own business’ flag flying regardless.

Though taking this bold step could bring with it some very challenging conditions which may pose themselves insurmountable, yet they are not once you are truly ready to trample them underfeet.

The environment factors are factors that cannot be fiddled. They are necessary concerns that must be given hundred percent attention particularly when it comes to our businesses and their development. Much talk goes therefore to the external environment factors that may sustain grave effects on business growth if care is not taken duly.

Some of these factors are oftentimes defiant to control, until one tries to put the right measures in place to avoid them from ever happening in the first place. By this, they wouldn’t have to take shape let alone happening to disrupt the growth process of one’s business.

Efforts to nip these factors in this bud bring this content right in front of your face. Thus, it is these factors that this article shall be paying attention to. Thus, the 9 external environment factors affecting business are outlined below one after the other:

Economic Conditions

Certainly, economics must be one of the 9 external environment factors affecting business across the land. The state of the economy plays an important role in every aspect of daily life from the well-being of personnel to the ability of a company to thrive.

When the economy trends downward and unemployment rises, businesses may have to work harder to keep their staff and change their processes to continue earning revenue. If the company produces products for retail sale, for instance, it may consider lowering the price to increase sales and positively affect its revenue.

Natural Issues

As environmental awareness continues to grow, more consumers have realized the effects of business processes on the planet. Some consumers have used their purchases to support companies that develop ecologically friendly practices, such as using compostable packaging and solar energy.

By paying attention to these external concerns and changing their operations, businesses can make changes that help them protect the environment, retain customers and increase revenue.

Technological Innovations

As technology continues to advance, companies can benefit from these breakthroughs or face challenges in competing with them. For example, a company that manufactures GPS devices for personal cars may experience a decline in business because of the integration of GPS on mobile devices, but it can confront these challenges by developing new products. Other companies, such as health care providers, can use modernized methods to collect information from their patients, keep patient records and streamline patient care.

Read Also: Major External Environmental Factors to Consider While Investing in Nigeria

Social Expectations

Where people live, their personal values and their socioeconomic status affect what, where and why people make purchases. Businesses take social factors into consideration when developing and marketing products, and many use current events, movements and social issues to appeal to their customers. For example, a company that supports a women’s organization may earn the trust and loyalty of customers who identify as female.

Catering to the specific preferences and expectations of underrepresented groups, who have more influence on the market today than in past years, can also contribute to customer satisfaction and business growth.


Companies with successful products and services evaluate the demographics of their target market to ensure they meet the needs of those who benefit from their offerings. They also perform tests to measure how well they serve their customers.

This helps them understand if their target market has changed and how they can develop better ways to serve their loyal customers and earn new ones. Demographics that affect business decisions and processes include: Age, Gender, Race, Nationality, Belief system, Marital status, Occupation, Income, and Level of education.

Rising Competition in Business

Businesses can increase their market share and stay relevant to their customers by keeping track of their competitors. They can identify and evaluate successes and challenges, thus learning what to incorporate into their own processes and how to prevent revenue loss. They can also use the information they gather to develop ideas for product changes, product relaunches and new product development.


Executives have a duty to keep track of both domestic and global issues, especially if they conduct business internationally. By learning about social issues that affect those in other countries and their cultural norms, consumer trends and economic status, company leaders can provide their teams with relevant training.

This enables them to develop products or offer services that meet the needs of international customers by providing solutions to challenges they face as consumers.

Political and Legal Issues

As political officials leave office and new ones replace them, the policies they implement often affect businesses in relevant industries. Because of the inconsistent nature of politics, businesses monitor legislative bills closely to prepare for potential changes. Policies that can have long-term effects on companies are Taxation, Tariffs, Employment law, Competition regulation, Import restrictions, and Intellectual property law.

Companies affected by political decisions must modify their processes to comply with new legislation and regulations but doing so can keep them in business.

Relativity of Ethics

Because each individual has a distinct concept of ethics and morality, some companies may find it challenging to balance the personal lives of staff members with their expectations in the workplace. Employees’ leisure activities, such as social media accounts, can reflect on their employer.

As representatives of the company, they have a responsibility to avoid behavior that could negatively affect the business. Managers can address issues such as sharing classified information or the harassment of a colleague outside of work by establishing guidelines and taking disciplinary action when necessary.

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