Business Environment

Business Environment

Business Environment Jonathan Poland

The business environment refers to the external factors and conditions that can affect a company’s operations and performance. It includes elements such as the economic climate, political landscape, technological developments, and competitive landscape. The business environment can have both positive and negative impacts on a company, and it is important for businesses to be aware of the various factors that can affect their operations.

The business environment can be divided into three main categories:

  1. Micro environment: This includes factors that are directly related to the company, such as customers, suppliers, shareholders, and employees.
  2. Macro environment: This includes larger, external factors that can affect the company, such as economic conditions, political climate, and technological advancements.
  3. Global environment: This includes factors that have an impact on the company’s operations on a global scale, such as international trade policies, cultural differences, and global economic trends.

It is important for businesses to carefully monitor and analyze the various elements of the business environment in order to anticipate and respond to changes and opportunities. This can help companies to make informed decisions and stay competitive in their market. The following are illustrative examples.

Economic Environment

An economic environment including the interest rates, credit conditions, growth rate, debt levels and price stability of an economy.

Business Cycle

The state of your industry. For example, an industry that is investing in capital and expanding supply versus an industry that is divesting and reducing supply.

Confidence

The confidence of businesses and consumers. For example, an environment where customers are optimistic about the future such that they are taking out loans, reducing savings and spending.

Competition

The competition and their competitive advantages. For example, a small firm entering a market dominated by a large firm with high brand recognition, a large number of loyal customers and a good reputation.

Political Environment

The political environment including the stability of a government and society.

Economic Security

The resilience of the economies in which you operate. For example, a nation that has poor IT infrastructure that is vulnerable to information security risks.

Culture

The cultures in which you operate including national cultures, communities, business culture and consumer culture.

Values

The values of the societies in which you operate. For example, a society that demands that firms not damage the environment.

Customers

Customers including demand levels, customer needs, preferences and perceptions.

Demographics

The characteristics of current and future populations. For example, a fashion firm that enters a market with a large number of teenagers and young adults.

Regulations & Taxation

The burdens placed on a business by governments including taxation, administrative burden and regulations.

Trade

Access to foreign markets and competition from abroad.

Resources

Access to resources. For example, a trade war that threatens to cut off a critical supply.

Productivity & Efficiency

The output you get for each unit of input. Productivity and efficiency rates can differ greatly from one country to the next based on factors such as working culture, infrastructure and access to education.

Markets

The characteristics of your markets. For example, a product category that is dominated by a single ecommerce company.

Partners

Your network of partners including factors such as partner performance or competition for partnerships. For example, a supply shortage that makes it difficult to secure critical parts.

Change

Changes to business models, technology, values, customer needs, products and competitive capabilities. For example, an energy company that has its business model challenged by a cleaner, less expensive form of energy.

Risk

Uncertainty about change. For example, the risk your competition will release a product that is an order of magnitude better than yours.

Sustainability

Your impact on nature and communities. For example, a hotel that owns land that is critical to an endangered species.

Internal Environment

The term business environment is occasionally extended to include the internal environment of a firm such as its strategy, operations and corporate culture.

Learn More
Lifecycle Cost Analysis Jonathan Poland

Lifecycle Cost Analysis

Lifecycle cost analysis is a tool used to evaluate the total cost of owning and operating a product, system, or…

Income Statement Jonathan Poland

Income Statement

An income statement is a financial statement that shows a company’s revenues, expenses, and profits over a specific period of…

Implementation Jonathan Poland

Implementation

Implementation is the process of putting a plan or idea into action. In a business context, implementation refers to the…

Quality Metrics Jonathan Poland

Quality Metrics

Quality metrics are measurements that are used to evaluate the value and performance of products, services, and processes. These metrics…

Generic Brand Jonathan Poland

Generic Brand

A generic brand is a type of brand that does not have a distinct or unique image. Instead, it is…

Brand Equity Jonathan Poland

Brand Equity

Brand equity refers to the value that a brand adds to a product or service. It is the positive perception…

Quality Objectives Jonathan Poland

Quality Objectives

Quality objectives are specific, measurable targets that organizations set in order to improve the quality of their products or services.…

Accountability Jonathan Poland

Accountability

Accountability refers to the responsibility of an organization or individual to provide explanations for their actions and accept responsibility for…

Capitalist Realism Jonathan Poland

Capitalist Realism

Capitalist realism is the theory that capitalism is the only economic system that is realistically possible or viable. This term…

Content Database

Business Assets Jonathan Poland

Business Assets

In business, assets are useful property that are owned by the company. These assets can be divided into three categories:…

Knowledge Value Jonathan Poland

Knowledge Value

Knowledge value is the value that is derived from knowledge, skills, and information. It can be a measure of the…

Decoy Effect Jonathan Poland

Decoy Effect

The decoy effect is a cognitive bias that occurs when people make choices based on the relative attractiveness of options.…

What are Power Structures? Jonathan Poland

What are Power Structures?

Power structures are the systems or frameworks that are used to exert control or influence over a government, organization, or…

Behavioral Targeting Jonathan Poland

Behavioral Targeting

Behavioral targeting is a form of online advertising that uses information about a user’s online activities to create targeted advertisements.…

Product 101 Jonathan Poland

Product 101

A product is an item that is offered for sale. It can be a tangible good, such as a car…

Teck Resources Jonathan Poland

Teck Resources

Teck Resources Limited (TECK) is a company involved in the exploration, acquisition, development, and production of natural resources across Asia,…

Opportunity Cost Jonathan Poland

Opportunity Cost

Opportunity cost is the value of the next best alternative that is given up as a result of making a…

Examples of Transparency Jonathan Poland

Examples of Transparency

Transparency refers to the practice of openly and honestly disclosing information to stakeholders within an organization, such as the public,…