Business Environment
There are several internal and external factors that can influence a company’s business decisions. Different combinations of these factors, like price, social changes and regulatory changes, can influence the overall environment where a business operates. Learning more about these ecosystems and how a business might navigate them can help you adapt to changes and keep a relative and positive reputation in your market. A business environment is all the components that affect a business. These include both internal factors, like employees and resources, and external factors, like customers and markets. Each of these contributes to a company’s working environment and can influence how the business functions.
Types of business environments
Economic
Economic environments are how global and local economies might impact a business. This can include factors like economic conditions, including per capita income in your target market, or bigger economic systems, such as if a business operates in a capitalist or socialist society. When evaluating your economic business environment, you might consider spending pattern trends, inflation rates and growth rates to help you decide how you might market and sell your products.
Sociocultural
A company’s sociocultural environment involves the characteristics of people in a specific market, like demographics and societal roles. You might consider aspects like your customers’ beliefs, language, literacy and life expectancy when learning about this environment. Each of these could determine how you might reach specific customers or how they might engage with your brand. For example, if a family dynamic changes where it’s more common for households to have one child rather than two, you might consider how this could affect your marketing
Technological
A technological business environment includes the development of new technology, how people interact with technology and its environmental effects. Technology can impact a company’s internal and external environments. Internally, it might influence things like the price of production or how you might automate certain tasks. Externally, technology can affect how consumers communicate with each other and how quickly they adapt to advancements in the field.
Competitors
A competitive environment is how companies within your market change and function and how this might impact your business. This can include when other types of competitors, both larger and smaller than your company, might enter or exit the market, as this could affect different behaviours like brand positioning. Economic and market environments often impact competitive environments as businesses could adjust their strategies, encouraging you to do the same.
Political
A political business environment can involve activities in governments or other legal bodies that influence how businesses might operate. Factors that influence this business environment can include government stability, policies involving businesses and new regulations. This environment can alter other factors, like the suppliers’ environment, if there are changes to import and export regulations or new investment policies.
- Economic
Economic environments are how global and local economies might impact a business. This can include factors like economic conditions, including per capita income in your target market, or bigger economic systems, such as if a business operates in a capitalist or socialist society. When evaluating your economic business environment, you might consider spending pattern trends, inflation rates and growth rates to help you decide how you might market and sell your products.- Sociocultural
A company’s sociocultural environment involves the characteristics of people in a specific market, like demographics and societal roles. You might consider aspects like your customers’ beliefs, language, literacy and life expectancy when learning about this environment. Each of these could determine how you might reach specific customers or how they might engage with your brand. For example, if a family dynamic changes where it’s more common for households to have one child rather than two, you might consider how this could affect your marketing- Technological
A technological business environment includes the development of new technology, how people interact with technology and its environmental effects. Technology can impact a company’s internal and external environments. Internally, it might influence things like the price of production or how you might automate certain tasks. Externally, technology can affect how consumers communicate with each other and how quickly they adapt to advancements in the field.- Competitors
A competitive environment is how companies within your market change and function and how this might impact your business. This can include when other types of competitors, both larger and smaller than your company, might enter or exit the market, as this could affect different behaviours like brand positioning. Economic and market environments often impact competitive environments as businesses could adjust their strategies, encouraging you to do the same.- Political
A political business environment can involve activities in governments or other legal bodies that influence how businesses might operate. Factors that influence this business environment can include government stability, policies involving businesses and new regulations. This environment can alter other factors, like the suppliers’ environment, if there are changes to import and export regulations or new investment policies.