Wishing to scale your business? Understand how business environment plays a vital role.
For any business to succeed, it has to come up with answers to these questions. Which activities to be involved in? where will resources come from? When and where to sell the products. Business is the transformation process of inputs to output to make profits while the context on which this process occurs is the environment. Therefore, the business environment is the combination of both internal and external surroundings that affect the activities of a business. It can have negative or positive impacts on a business.
Strategies are set to govern all activities to attain the overall purpose of a business. These include a comprehensive list of objectives that creates a foundation for future business planning. It also contains the exact location of the business headquarters and the number of employees. High-quality management skills are encouraged in business for leadership and decision making to maintain progress. Therefore, the internal business environment consists of all factors within business boundaries that contribute to its success or failure.
Business relation to its customers is vital in meeting the primary goals of marketing. The business has to win the customer's confidence by honesty, integrity, and clarity. It has to invent ways of getting new and maintain already existing customers. Goods and services produced must also satisfy customer's utility and be in line with their income.
However, a business can be affected by other factors that are beyond its capabilities. They are called external business environments because they prevent the development of a company yet they cannot be corrected by the business. They force the business to adjust unto them to meet its mission statement otherwise impact failure. They include:
Technological factors. Machines and more updated computer programs are invented day by day. If a business complies with the current technology, it reduces the cost of production and at the same time increases revenue and profits. These are so because machines produce high-quality goods and services compared to little or no use of technology. Technology provides some modern businesses an edge over their competitors. For example, many young businesses have leveraged DexlabPOS to operate and manage their businesses in real time.The reporting and analytical tools of the system is a dream come true for managers wishing to scale their businesses. Managers are able to make data driven decisions that is analytical and fact based. https://pos.dexlabtechnologies.com.
Economic factors. Many are times businesses are affected by how the economy is running. High-interest rates discourage customers from spending the little money they have. Consequently, business reduces its sale thus reducing its profits. In the case of deflation, businesses are forced to lower the price of goods and services without considering the production cost. Cumulative loss leads to business dissolution such that even a well-running business may not be able to survive in a poor economy. Businesses cannot control the economy, but understanding it can help spot threats and opportunities.
Demographic factors. Before starting any business, one has to consider the population in terms of age, gender, race, ethnicity, and location. These help in analyzing the general market for its products. If there has been a record of rapid population growth associated with rising income, then, the market of products is said to be expanding. Moreover, a longer life span of this population leads to a rising market for products of elderly people.
Political factors. Sometimes the government can initiate policies that discriminate business activities. For example, in the year 2016, cigarettes and hand-rolling tobacco were restricted in the UK. This was a way of reducing smoking intake by young people and supporting adults to quit. In that account, many tobacco companies were forced to close up due to the reduction of customers. High cost licensing also restricts business ventures as only a few people will afford that large amount of money. Eventually, many will abandon those businesses and engage in less costing one. Firms are the source of income to the economy. They produce goods and services and sell them to their clients. Their profit is the money generated on sales above the production cost. Large firm profit means that its employees receive high salaries. Inflict of tax to this flow reduces the income and purchasing power as it is imposed to every individual and legal entity in a country.
However, having a wide knowledge of the business environment before starting any business helps to identify opportunities and threats. These give an idea of how to cope up with any problem that might arise. It also assists in policy formation and planning. Businesses will tend to add more resources to the production line which does not interfere with the environment to maximize profits. The success of a business is proportionate to its relationship with its environment.