Business is the political, economical, social, technological, environmental and legal factors that are not in the business and cannot be controlled by the business either, but they affect the operations of the business. With the developments in different sectors in the current generation, they will affect the operations of your business. These business environments are called PESTEL which stand for Political, economical, Social, Technological, Environmental and legislative factors.
Political factors are the government policies that influence business. The policies ensure that the business produces the goods that are approved and required. Government also has impacts on infrastructure such as roads and communication. It also has impact on the education, health and security of the employees as well as the security of the business.
Economic factors are the interest rates, economic growth, exchange rates and inflation rates. The economic growth of a country determines the economic development of the business. When the economy goes down then the business will make less profit. Same applies to the exchange rates, whereby when the country’s currency becomes stronger then the business will gain in the external markets.
On social factors, we consider aspects such as the community. Business will only produce goods and services approved by the community it is serving. The goods and services offered should be fully supported by the community’s norms and values, because the community provides the employees as well as the target market. The business should also give back to the community to sustain customers and ensure a longer life.
Technological factors affect the technology used in the company. The company has to ensure it has an efficient machine that is at par with the latest generation. This is so because in the current world, the technical field is being modified on a daily basis. To attract and maintain customers, the company has to make sure it has the latest produced machines that work efficiently and faster. Currently, most of the companies are computerizing almost all of their operations and this is where companies are ranging. Improving technology also means improving the quality of the products thus giving it a first hand in the market.
Environmental factors are the factors that have to do with the weather and climate for long-term purposes. With a lot of industries evolving, there is a lot of harm brought to the environment such as green house gases which lead to global warming. This is a point of concern and so most of the industries produce their goods in line with these conditions. That is, they try to produce goods that are environmentally friendly. Customers will also want to buy goods that promote environment conservation. You will find that most firms will carry out projects such as tree planting and even environment cleaning.
Legal factors are the terms and conditions to which a business is allowed to operate in a given country. Therefore the business has to be legal according to a country for it to operate. The business must be able to pay taxes as required. It has to have the certification from authority that it is acceptable. The goods and survives provided must also be checked for quality assurance before they are authorized. Customers will only buy legal goods as they do not want to be caught on the wrong side of the law.
Just as the social contract theory proposes, the business should be able to maintain the social welfare of the community as well as the employees without breaking any laws in the canons of justice. Before even taking a legal notice to own business, the society has to approve first. This is because they are the owners of the resources being used, the employees and even provide market for the product. Any business that poses a threat to the community cannot move on. When there is security with the existence of the company then the stakeholders can now go ahead and get a legal authority.
On the stake holder theory, the business has to attain the goals of the stakeholder. Most of the stakeholders’ goals are always affected by the economic factors. The stakeholder aims at maximizing profits. The economic factors affect the profits of a company massively. This is because economic factors entail the interest rates, inflation rates and even exchange rates for the exports and imports. Therefore any decisions made by the company will always consider the stakeholders interests.
All these environments work together to ensure the success of the business. The conditions must be followed by the company and assumption of any one environment can lead to downfall of the company. The moment your business is illegal then the members of the society will not have approved it. This leads to the loss of employees and the customers. Whenever a business does not have a market then sales will not occur and thus there will not be any profit made.
Sometimes the government may lack funds to buy the required machineries for the operation of some industries. This will mean that the companies will be using the old machines which are not efficient. The machines may not be according to the current technology and therefore produce goods and services of lower quality than the other companies. Remember every company aims at beating its competitors and producing goods of first hand. This will only work with better working equipment. The only solution by which the government can get money without borrowing is either from donors or the citizens’ tax. To get the funding from the tax, the business has to be doing well so as to ensure higher taxes without loss.
With the improved technology, there are industries evolving. This means that a lot of harmful wastes such as the greenhouse gases. These gases result into global warming which in turn bring about scorching effect to plants and skin cancer. This proves to be a challenge because as much as the companies should be improving on their production technology, they should also conserve the environment. This can be hindering the improvements in the production sector. This is also a challenge to the innovators too. So as not to pose threat to the companies, they should always produce environmentally friendly machines.
Political instability can in turn cause instability in the education sector.
Lack of sufficient education leads to unskilled labor
When there is no skilled labor then some machine operations cannot be carried out. This will produce below standard goods that will not be marketable in the market therefore leading to no profit made or loss made. Lack of sufficient education can also lead to no innovations at all as these innovations only come from the learned and experienced.
For better working conditions, there should be innovations of environment friendly equipment that will not restrict the business from exploring them. Nowadays, better equipment comes along with harmful side effects. This is a major blocker to the business enterprise. When this is solved there can be better quality of products and increase the urge of the business to be at the top.
Business should also mind the welfare of the society. They can build schools and even recreational facilities for the community. This improves their CVs to the public and therefore can gain favor in the eyes of the public. A company that is concerned with the welfare of the society, gains trust from the public, and so is assured of customers and a longer business life.
Legal and political issues are more or less having one strategy to achieve. All their needs are aimed at living by the rules and regulations of the country. Once a business enterprise accomplishes the legislative needs then it has also partly covered the political aspects. This therefore offers the business an easy work to manage the two environments. Another reason is that the political body is the same body that manages the legal issues.
On conclusion, for a business enterprise to prosper it has to balance all the environments. It has to ensure that the society is in agreement with its ideas; they have to be environmentally friendly and use high technology equipment to produce quality goods. Integrating the environments in business helps in enhanced management of the company and so is one of the best strategies of management.
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