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

7. 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.

8. 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.

9. 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

10. 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

11. 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.

12. 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.

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