External Environment, its types and factors affecting it.

1. External Environment
Shubham Ghimire

2. Business Environment
According to Stephen P.
Robbins & Mary Coulter,
“Environment refers to
institutions and forces that
affect organizational
performance.

3. Types of Environment

4. External Environment
Business environment may be defined as all those
conditions and forces which are external to the
business and are beyond the individual business unit,
but it operates within it.
External environment refers to the environment that
has an indirect influence on the business.
The factors are uncontrollable by the business.

5. Types Of External Environment
Micro Environment
• The micro environment is also
known as the task environment
and operating environment
because the micro
environmental forces have a
direct bearing on the
operations of the firm.
• The micro environmental
factors are more intimately
linked with the company than
the macro factors.
Macro Environment
• Macro environment is also
known as General environment
and remote environment.
• Macro factors are generally
more uncontrollable than
micro environment factor.
• When the macro factors
become uncontrollable , the
success of company depends
upon its adaptability to the
environment.

6. Micro Environment Factors
Customers
Employees
Suppliers
Shareholders
Media
Competitors

7. Customers
 The major task of a business is to create and sustain customers. A
business exists only because of its customers.

8. Employees
 Employing staff with relevant skills and experience is essential. This
process begins at recruitment stage and continues throughout an
employee's employment via ongoing training and promotion
opportunities.

9. Suppliers
 An important force in the micro environment of a company is the
suppliers, i.e., those who supply the inputs like raw materials and
components to the company.

10. Shareholders
 As organisations require investment to grow, they may decide to raise
money by floating on the stock market i.e. move from private to
public ownership.

11. Media
 Positive media attention can “make” an organisation (or its products)
and negative media attention can “break” an organisation.
Organisations need to mange the media so that the media help
promote the positive things about the organisation and reduce the
impact of a negative event on their reputation.

12. Competitors
 Competition is a basic feature of an open market economy. No
business organization can ignore its competitors and their business
stratergy.

13. Macro Environment Factors
Political
Economic
Social
Technological
Legal
Environmental
Ethical

14. Political
 How changes in government policy might affect the business e.g. a
decision to subsidies building new houses in an area could be good
for a local brick works.

15. Economic
 How the economy affects a business in terms of taxation, government
spending, general demand, interest rates, exchange rates and
European and global economic factors.

16. Social
 How consumers, households and communities behave and their
beliefs. For instance, changes in attitude towards health, or a greater
number of pensioners in a population.

17. Technological
 How the rapid pace of change in production processes and product
innovation affect a business.

18. Legal
 The way in which legislation in society affects the business. E.g.
changes in employment laws on working hours.

19. Environmental
 Growing awareness of the potential impacts of climate change is
affecting how companies operate and the products they offer, both
creating new markets and diminishing or destroying existing ones.

20. Ethical
 What is regarded as morally right or wrong for a business to do. For
instance should it trade with countries which have a poor record on
human rights.