Explain 5 ways in which external business environment may negatively affect business operation
Answers
External factors of the micro environment of business are as follows:
Customers: As all businesses need customers, they should be customers-oriented. The firm’s marketing plan should aim to attract and retain customers through products that meet their “wants and needs” and excellent customer service.
Employees: Employing staff with relevant skills and experience is essential. This process begins at the recruitment stage and continues throughout an employee’s employment via ongoing training and promotion opportunities. Training and development play a critical role in achieving a competitive edge; especially in Service Sector Marketing. If a business employs staff without motivation, skills or experience it will affect customer service and ultimately sales.
Suppliers: Suppliers provide businesses with the materials they need to carry out their business activities. A supplier’s behaviour will directly impact the business it supplies. For example, if a supplier provides a poor service this could increase timescales or product quality. An increase in raw material prices will affect an organization’s Marketing Mix strategy and may even force price increases. Close supplier relationships are an effective way to remain competitive and secure quality products.
Shareholders: As organizations require investment to grow, they may decide to raise money by floating on the stock market i.e. move from private to public ownership. The introduction of public shareholders brings new pressures as public shareholders want a return from the money they have invested in the company. Shareholder pressure to increase profits will affect organizational strategy. Relationships with shareholders need to be managed carefully as rapid short term increases in profit could detrimentally affect the long term success of the business.
Media: Positive media attention can “make” an organization (or its products) and negative media attention can “break” an organisation. Organizations need to manage 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. Some organizations will even employ public relations (PR) consultants to help them manage a particular event or incident. Consumer television programmes with a wide and more direct audience can also have a very powerful impact on the success of an organisation. Some businesses recognize this and will change their reaction when consumers mention that they are going to contact a consumer television programme or the newspapers about the business.