Things to Know When Planning a Business: The Business Environment
Businesses operate in a complex environment – it is essential that you study the business environment that you operate in as it affects the outcome of your decisions. They include the political, economic, social, technological, legal and ecological environments. Studying these enable a businessman to get a comprehensive picture of the business environment he operates in:
Political Environment – businesses are affected by the political structure of the country within which they operate. Good political environment ensures that businessman can efficiently conduct business without red tape and bureaucratic delays.
Economic Environment – businesses are directly influenced by the economies that they operated in. Studying economic trends can assist entrepreneurs in forecasting possible future movement of the economies. Economic indicators relevant to businesses are:
*Potential customer’s spending power
*Potential supplier’s pricing
*Interest rate
*Consumer price index
*Retail sales index
*wholesale and manufacturing indices
*Inflation rate
*Exchange rate
Other economic indicators such as national income, labour market, productivity, industrial production index, investment commitment and external trade are available at Statistics Canada website.
Social Environment
Business enterprises operate within social communities. Factors such as the education level of people, working patterns, leisure activities, and the role of women in the workforce affect the viability of a business entity. For example, how people react to a product or service will depend on their lifestyles.
Technological Environment
Technological advances have led to the invention of new products and influenced the manner in which business is conducted. For example, cell phone technology has resulted in a high demand for cell phones and accessories. Similarly, the advent of the Internet has led to home shopping and e-commerce. Technology also means that goods are delivered fast and more conveniently. Online stores have transformed the way retailers operate. Credit cards and emails ensure quick transaction and easy service. Marketing techniques using new technology ensure a better product reach. Innovations in production technology have led to the creation of new products at competitive prices.
Legal Environment
Businesses have to take into consideration government statutes pertaining to commerce, manpower and other business-related areas as these will have an impact on their companies. They have to abide by government laws on working hours, minimum wages, industrial production and taxation.
Ecological Environment
Ecological concerns have begun to generate much public feeling. People’s views on issues such as pollution, radiation and depletion of the environment affect the business entity. Are target customers environment-friendly? Are they aware of environmental issues such as recycling and pollution? If there is a recycling culture in the community, businessmen can explore ways to use packaging that can be recycled. This will put the business in favourable light before target customers.
