Question

How do business organizations respond to external environmental influences?

Answer 1

There are six external environmental influences  to which business has to respond. They are as follows-

• Political
• Economic
• Social
• Technological
• Environmental
• Competitive

Political environment affects business organizations greatly. This environment affects business as it may not be stable. For example, if Government keeps on changing then their policies in the economy also changes so according to the policies business organisations have to respond. Like if one government want the business firm to follow GST ( Goods& service Tax)   norms then business firm has to respond accordingly.

If in the economy unemployment is increasing then business firm has to see that how they can increase employment opportunities to be successful in the economy. and Like wise if inflation is there then business firm has to set their prices of the product accordingly. So economic factors affects the business firm.

As it can be seen that fashion is changing so demand of the people for the product  also vary according to the trend. For example, earlier semi automatic washing machine were used to wash clothes but now fully automatic washing machines have come so now business firm has to respond according to the demand of the product. Therefore, social factors influence the business.

Technology also greatly affect the business organisation as technology is changing day by day. For example, Earlier only offline mode was there for shopping but now people are doing shopping through online method so business firm need to update their websites so that they can get customers online also.

Environment also affects the business organisations as environment keeps on changing so demand of the product also vary with the change in environment. For example, in the summer season cotton clothes sales increase and in winter its sales decrease. So business firm has to respond accordingly.

Competition also affects business firm greatly as substitutes for the goods are available so firm has to keep the price of the product low so that customer would not get the chance to switch their product to the substitute available in the market. It also has to take care of the quality of the product.

Answer 2

Every business organization wants to be successful in the market and they need to deal with the external factors that influence it. The external factors are outside the company in regard to the demographic factors, political factors, socio-economic factors, ecological factors, technological factors, and more.  

Explanation:

• It is necessary for the business organization to work through these external conditions and keep the flow of operations moving. The success of business organizations depends on their ability to adapt to environmental changes.

• The external environmental factors can be further divided into the macro environment and microenvironment.

• Each of these external environmental factors influences the business organizations in a direct or indirect manner.  

• There are the different political issues, business policies of the government, taxes and other technical issues which need to be handled amicably by the business organizations and adapt to the changes and move with the flow of business.

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