A
business that fails to understand the environment in which it operates is a business with a very
short life span.
External environment in a business context refers to all
the factors that exist outside of the businesss internal structure. It is, therefore, a vast
universe including laws and regulations passed and enforced by government, macroeconomic factors
involving markets and interest rates, perceptions of the market targeted by the business,
availability of skilled labor, and level of competition confronting the business in question.
These factors or variables can directly affect a companys performance and future. Knowledge of
interest rates, for example, is essential if management determines it needs to expand or
recapitalize. Knowledge of the labor pool is important if a company needs to add or replace
staff and cannot afford to increase wages. Knowledge of the market is vital, as without such
knowledge management may miss opportunities and indicators of changing...
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