External Environmental Factors
1. Social Conditions
A Sociological perspective
of environment includes the Demographic Status and Trends, the Work Ethic
and Personal Values and General Cultural Values.
Each of these influences how management accomplishes its jobs. Each country has a unique Social Environment and as business becomes international, management must understand these unique environments.
Each of these influences how management accomplishes its jobs. Each country has a unique Social Environment and as business becomes international, management must understand these unique environments.
·
Demography
- Demography means the total number of population of any
particular territory. They have a greater influence of any business operation.
For example in a mass populated area demand of consumer products will
be comparatively higher than any lesser populated area. So, we can say
that demography has a direct impact on business environment. Because demand
direct towards maximization of sales. The higher the value of
sales the more would be the profits. The more profits impacts on
success business operations.
·
Cultural Forces - Culture is that what we are
that means our living, eating, food habit, way of dressing and way of
speaking everything accumulated to our culture. For example wearing lungi,
eating panta with hilsha fish on Bengali New Year is part of Bangladeshi
culture, every Bangladeshi respect or practices this culture. But it is not
acceptable in western or European culture. Wearing shorts eating fast
food, having wine party are their culture. But it is not acceptable in
Bangladeshi culture. As a result demand of shorts and wine is
completely higher in the western society than that of in Bangladeshi society.
·
Work Ethics and Personal Value - The importance placed upon work by an individual is known
as work ethic. Business organizations counted upon the desire to
work in its employees, a work ethic expressed in dedication and company
loyalty. However work ethic has changed especially in younger workers and it is
obvious that the attitudes of the workers will impact upon the organization as
it recruits, trains, rewards, and retains employees.
2. Political
Influences
Political environment has a
direct impact on any country’s business environment. Some political
environments result in a comparatively better business environment and
vice versa. For instance, Instable political environment in Iraq, Pakistan is a
major obstacle for their operations. Government policy of a country depends
upon the political culture of a country. It can be different types based
on the form of government. Such as, policy in a communist country will not be
match with the policy of a democratic or monarchy form of government. So government
policy of a stable politics be better than an unstable political culture.
In a stable political state government can take any business friendly decision
to strengthen local business with the help of opposition party.
Law &
order situation should be controlled by the
government. But if any government failed to control this important factor of
batter business outcomes than the business environment of that country hamper
& businessmen feel insecure than no foreign investor can try to come such
as deadly environment. By this way
businesses as well as total economy of that country fall down.
3. Legal/Regulatory
Practices Laws are the primary way
in which Business is directly affected by the legal system of a country. Legal
practices of any country have a direct impact on the business operation of that
country. For example, if there are any bindings on the international
business transaction from the legal authority of any country then no company
can break down that rules.
For example, we can take the case
of License Raj
License Raj which
refers to the elaborate licenses, regulations and the accompanying red tape
that were required to set up and run business in India between1947 and 1990.
Up to 80 government agencies had to be satisfied before private companies
could produce something and, if granted, the government would regulate
production.
4. Economic
Conditions
In the functioning of a Business
Enterprise we can see that an organization makes use of resources
(input factors) to produce goods and service (output). All this takes place within
the general economic environment, which affects each of
these factors. Few of those factors are:
a. Economy Aspects
of the economy which must be considered by the management as it makes decisions
are
The existing stage of economy and
the stage of the Business Cycle
·
The Rates of Growth of GNP
and Per Capita Income
·
Rates of Saving and
Investment
·
Volume of Exports and
Imports
·
Inflation Rate
·
Interest Rate
·
Government Budgetary
Allocations
Internal Environmental Factors
1. Land
Generally, land means soil but in
business land includes everything inside the factory like boundary of
land, size of building, machinery installments etc.
2.
Labor
Workforce is another vital element
of productions and other business operations. Skilled manpower is not available
everywhere but manpower can be skilled up through a marathon coaching of
related tasks. At the same time we will have to think about the wages,
working environment, job security, job satisfactions of the workers. Job
satisfactions can provide best performance as well as creative outputs. Labors
can be satisfied through offering different motives. It may be financial
rewards and mental supports.
3. Capital
Capital means financial liquidity
of the organization. Fund may be collected from different sources. Such as Fully
owned capital or Through partnership agreement, Taking loan from the financial
institutions, Collecting capital from capital market, Joint venture fund
collection from foreign market Collecting fund is not the final tasks for
proper business operations. Because proper utilization of the fund i.e. capital
management functions have to be operated efficiently.
4. Business Location
Business location is a major
factor for successful operation of any business. Location should be selected
based on the following criterions a) Transportation facilities b) Availability
of raw materials c) Availability of labors d) Security Better transporting
facilities result in quick communication which is an essential factor for every
business. Business location should be selected after thinking availability raw
materials, skilled labor force and high security.
5. Owners Equity
Owner’s equity is that portion of
capital where liabilities are not included. Only self owned and other business
offered facilities are included here
