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All businesses
are subject to external factors
Photograph: CIMA
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All businesses are subject to factors outside the control of the business that can affect its success. These factors include:
- economic factors such as interest rates,
exchange rates, inflation, and government policy
on taxation and spending
- technological factors such as the introduction
of new technology, products becoming obsolete,
services becoming more efficient, power shortages,
computer viruses, and new ways of working
- political factors such as support by
the party in power for business or entry to
the Euro, pressure groups, legalisation of certain
goods and services or the banning of certain
activities or advertising, war and acts of terrorism
- competitors - how many there are in
the market place, how easy is it for new entrants
to compete, the market share of competitors
and their access to more money and better marketing
and technology
External factors can be opportunities or threats.
A company's management must find strategies for
minimising the threats and maximising the opportunities.
External factors that the management plans for,
such as terrorism, may never happen but it is
essential that plans are in place to keep the
business going, however extreme the external threats.
Management must also have thought through the
logistical consequences of a sudden increase in
demand for their product due to, for instance,
a health scare at a major competitor's premises.
These plans are called "contingency plans".
By planning for and managing external factors
the management are far more likely to be in control
when issues arise.
The How-To team have highlighted three areas that they are particularly concerned about:
- stakeholder groups (Shinkendo & DA)
- competitors and substitutes
- ethical issues
This section will look at ways in which businesses
can deal with these external factors.
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