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Telecommunications companies have adapted to this change by modifying the features of their products and taking different approaches to advertising methods. Now, people of all ages use mobile devices daily. Demographics that affect business decisions and processes include:įor example, when mobile phone companies emerged in the 1990s, their marketing efforts focused on young, successful professionals. This helps them understand if their target market has changed and how they can develop better ways to serve their loyal customers and earn new ones. They also perform tests to measure how well they serve their customers. Demographic factorsĬompanies with successful products and services evaluate the demographics of their target market to ensure they meet the needs of those who benefit from their offerings.

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Related: How To Navigate Workplace Politics 4. Policies that can have long-term effects on companies include:Ĭompanies affected by political decisions must modify their processes to comply with new legislation and regulations but doing so can keep them in business. Because of the inconsistent nature of politics, businesses monitor legislative bills closely to prepare for potential changes. Political and legal factorsĪs political officials leave office and new ones replace them, the policies they implement often affect businesses in relevant industries. If the company produces products for retail sale, for instance, they may consider lowering the price to increase sales and positively affect their revenue. When the economy trends downward and unemployment rises, businesses may have to work harder to keep their staff and change their processes to continue earning revenue. The state of the economy plays an important role in every aspect of daily life from the well-being of personnel to the ability of a company to thrive. Other companies, such as health care providers, can use modernized methods to collect information from their patients, keep patient records and streamline patient care. For example, a company that manufactures GPS devices for personal cars may experience a decline in business because of the integration of GPS on mobile devices, but they can confront these challenges by developing new products. Technological factorsĪs technology continues to advance, companies can benefit from these breakthroughs or face challenges in competing with them. Here are the nine types of external environment factors that affect businesses: 1. Related: What Is External Analysis? Definition and Examples 9 types of external environment factors Choosing to monitor the dynamic nature of external environment factors allows businesses to protect themselves against predictable events and mitigate the effects of unexpected changes. The external environment of a company changes constantly in ways beyond the company's control, but executives and managers can track these changes and minimize their consequences.

Why are external environment factors important?Įxternal environment factors are important because they can cause direct and indirect effects on business operations, personnel and revenue. Managers often keep track of external environment factors so they can recognize and resolve the issues the factors cause and make appropriate changes. These outside forces can help the business or present challenges to its current processes.

Related: General Environment: Six Factors That Influence Business What are external environment factors?Įxternal environment factors are elements that exist outside of a company's internal environment that can affect a company's operations. In this article, we discuss what external environment factors are, their importance and nine of these factors that affect businesses. It's also important to monitor any external environmental factors that can affect how the business functions as well as develop methods for overcoming these challenges. Business managers and executives have a responsibility to examine internal concerns for how they may influence company decisions. Business environments change frequently and require consideration when planning and conducting operations.

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