Describe and Analyse the External Environment of Business.

The external environment is the "external context within which an organisation exists and operates."1 One of the ways in which the external environment can be analysed is by assessing the impact of politics, the economy, social factors and technological factors (P.E.S.T. analysis). The organisations are affected either generally or immediately by the external environment. The immediate factors, also referred to as the operational environment, include aspects such as suppliers, financial institutions, customers and labour markets. The general features, or the contextual environment, comprise of the economic, political, legal and technological influences, for example. The political environment has an affect on businesses because they can influence the market structure and behaviour. The market structure is the share of a market particular companies have. The government have a regulation that states that no company can gain a bigger market share than twenty five percent, other than through organic growth. They control taxation and are responsible for any international trading blocs, therefore restricting overseas trade. The social environment has an impact on supply and demand. The amount of disposable income a person or group of people have influence sales and therefore play a big factor for companies. The demographics of a country affect this, as products have to be marketed and produced for specific consumers. The success of a business is influenced by technology because the innovation and investment of new technology increase competition because efficiency is usually increased.

The economic environment is affected by the government and can be viewed alongside one and other. Unemployment levels, inflation and interest rates are all part of the economical factors on business and are clearly also part of the political environment.
One of the main factors of the economy is inflation. Inflation is "a sustained rise in the average price of goods within

Bibliography: 1) The Business Environment 4th Edition- By Ian Worthington and Chris Britton. Page 491 2) Complete A-Z Economics & Business Studies Handbook 3rd Edition- By Nancy Wall et all. Page 147