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How Does the External Environment Affect Your Firm, Essay Example

Pages: 3

Words: 875

Essay

It is amazing how the external environment can affect ones company. This is because while one is much in control of the internal part of the company, the external part is left for the world to control. However, as many people have known about this phenomenon the question that still remains is how does the external environment affect ones firm? Six things are to blame here, these are, technological change, demographic, Political-legal, socio-cultural, economic and nature. In this paper thus we will be examining how these six things affects ones firm.

Technological Change

Technological improvement is something that is affecting most of the firms at the moment. This is because when something new comes into the market place, everybody wants to own it. Before television, many people marketed their goods using posters and other materials. However, the innovation of televisions gave people something to hold on to. People could now advertise their products to a much wide market while they remain in one place.

The same happened with the innovation of computers. In fact information technology is one thing that has had a great impact on marketing as more people now shift from physical stores to online stores. Major televisions and newspapers are now running their operations online while some of the customers have never really known the face of the shop that they get their goods from.

However, as technology grows and so the need for more income grows, since technology as much as it has its advantages, it is also equipped with a thousand of disadvantages. Most of the companies like banks and insurance companies that do most of their operations online have been forced to install major security features in order to keep intruders out. In addition to that, as technology improves more and more and so the need to learn these new aspects in order to continue with business.

Demographic

Many people have put the issue of population change first as their marketing is concerned. At the moment, you find that the market is divided into segments, which means that there are goods produced for all market segments. Take Pepsi for instance, the company realized that not every in the market will consume their products. The amount of sugar that is contained in their product cannot be sustained by the all population and thus the required to come up with new products for the few who do not consume much sugar in their systems.

Population change is what has caused many of the manufacturing industries to restructure their firms. This is because the more a place is populated the more firms find it easier to get cheap labor to include in their work force. In most cases these are the developing countries where standards of living are low while their education level does not leave them with any option but to take any form of job. In most cases never the less you will find that, the firm itself is located in the most populous region while its headquarters is located in an urbanized area. Thus while firms are concerned, population growth is very important. A good case scenario is with Nike Inc. and their main target for Asian countries.

Natural Factors

While many firms are obsessed with technology and population, raw material is the main factor that can really affect a firm. A good example is Boeing Inc. since as much as the company chose size to locate at the Amazon it also keeps raw materials as a priority. Most of their row materials come from China and other countries. Shortage of this material will therefore come as shock to Boeing as they will not manage to run their operations.

Fashion industry on the other hand is greatly affected by the climatic changes of a place. As much as designers will target major buyers, it is also important that their designs go with certain times of the year. Summer has its own fashion while winter will come with its own and this is a designer does not put this phenomenon in mind then he is doomed to fail. Also the energy costs is something that many companies adhere to observe as this also comes with its own consequences. The increase in oil prices contributes greatly to the increase in transportation of goods from the firm to the market as well as processing costs that firms use to run their machines.

Social-Cultural Environment

A firm can greatly be affected by the culture of a place. Different people buy different things while different companies will have different receptions in certain countries. When we take fashion for instance, it is important to notice that Muslims do not wear certain clothes. It is not that they do not want to wear this clothing but rather their religion or culture does not allow them too. The same goes with the Hindus, thus while one thinks of coming up with certain designs he has to put into mind that, this will be used by only some people.

Other aspects too exist, including the economy of a country which will affect a firm greatly due to the purchasing power of the people that live in that country. Trading rules that are being enforced by the government as well as entry barriers enforced can easily keep one out of the market.

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