EXTERNAL

ENVIRONMENT
STEEPLE
 SOCIAL
 TECHNOLOGICAL
 ECONOMIC
 ECOLOGIAL/ENVIRONMENTAL
 POLITICAL
 LEGAL
 ETHICAL
 Simple tool
 Forward looking
 Helps managers be informed.
  Ageing population: less younger work force, more people
for retirement
 changing patterns of demand. Teenagers will want
something else, elders something else.
 Market research will be important
 a change in the age structure of the workforce.

Social  Changing patterns of employment: women

employment, part time workers, student employment
 Part-time workers: greater flexibility, keep down
overheads. Poor motivation and control.
 Women: benefit from a wider choice of staff and improved
motivation among women workers. However, there will
be the increased costs of maternity leave and of providing
staff cover for this.
Social
 environmental protection: businesses have to act ethically, report environmental protection
measures, increases costs.
 Migration and multiculturalism: created opportunities for new businesses and more choice for
customers.
 Language barriers and opportunities.
Technological
 Spreadsheet program: accounting, forecasting, balance sheets, cash flows.
 Good for “what if” situations, saves time and effort, quick.
 Computer-aided design (CAD): used by architects, for 3D projection
 More flexibility of design, can obtain product costings, prepare for ordering of required supplies, save
designer salaries
 Computer-aided manufacturing (CAM): operate robotic equipment that replaces many labour intensive
production systems
 Productivity is increased, labour cost less, variable costs per unit are lower, Accuracy is improved,
Flexibility of production
 Internet/intranet: Communication
 cheap internal and external communications, access to a much larger potential market, Web pages project
a worldwide image of the business, Online ordering, Internal communication is quicker than traditional
methods.
 Technological
 Costs
 Capital costs can be substantial, labour training costs will be necessary and will recur regularly with
further technological development.
 Labour relations
 These can be damaged if technological change is not explained and presented to workers in a positive
way.
 Trade unions can oppose technological change if it puts members’ jobs at risk.
 Managers
 recognising the need for change and managing the technological change process require a great deal of
management skill
 Job creation and loss
 Danger of information overload and hacking.
Economic
 Created by inflation, employment, economic growth and healthy international trade balance.
 Inflation (cost push, demand pull)
 Higher wage demands, higher costs of materials and components will lead to cost-push inflation. If prices
cannot increase, profit margins will fall. Businesses might seek cheaper sources of supply or more
efficient production methods to help in lowering costs per unit.
 Demand-pull inflation will encourage firms to raise prices to increase profit margins.
 Substantial increases in inflation will lead to action being taken by the government or country’s central
bank to increase interest rate.
 Higher inflation in any country will make a business less competitive internationally.
 Unemployment
 Types: frictional, seasonal, structural (demand falls), cyclical (severe, lack of demand),
 Regional, technological
ECONOMIC
 Social cost of unemployment like depression, crime, anxiety
 Government uses combination of measure to tackle unemployment
 Reduce taxes, reduce interest rates
 Protectionist foreign policies to safeguard domestic interest
 All these stimulate businesses
 Welfare schemes run by government increase tax burden and reduce international competitiveness of
businesses.
 Fall in unemployment makes tough for businesses to find people to work.
 They may train existing staff more to increase their skills
 Capital intensive production methods
 Relocate to country where labour available
Economic
 Economic growth
 Increase in GDP
 business cycle: patterns of fluctuation in economic growth
 Boom: consumer expenditure, investment and export earnings all increasing, unemployment is low,
 Recession: GDP falls for two consecutive quarters, declining aggregate demand, lower investment, falling
export sales and rising unemployment
 Trough: bottom of recession, high unemployment alongside very low levels of consumer spending,
investment and export earnings, poor cash flow,
 Recovery: GDP increases again, all other parameters also rise.
 during recession, demand falls, businesses reduce production, lay off workers, decrease investment
 Business flexibility will be important for survival and profitability
ECONOMIC
 International Trade Balance
 records the value of a country's export earnings and its import expenditure
 Exchange rate and fluctuations
 Protectionist measure to safe guard domestic businesses: tariff, subsidies, embargo, quota, compliance
standards.
 ENVIRONMENTAL
 depletion of renewable resources
 organic farming
 global warming
 carbon footprints.
POLITICAL
 Fiscal policy – relates to taxation and government spending.
 Deflationary: increase taxes, reduce government expenditure
 Expansionary: decrease taxes, increase government spending
 Monetary policy – relates to interest rates and exchange rates
 Raising interest rates makes borrowing less attractive and reduce disposable income. Reduce consumption
and investment expenditure.
 Attracts foreign investors as they get a higher return on their money. They demand for the currency,
making it appreciate.
 Currency appreciation makes exports more expensive.
 Deregulation: reducing rules and regulations bureaucracy.
 Corruption
LEGAL
 Consumer protection: prohibits misleading descriptions, meet certain quality standards, makes business
liable for damages caused by the products. selling faulty goods or those described incorrectly, high-
pressure selling tactics, not allowing consumers to change their minds after signing credit agreements.
 Sales staff will need training in the legal rights of consumers – breaking consumer laws will lead to
expensive legal claims.
 Design and production of new products will have to put customers’ safety and product quality as
priorities.
 Full disclosure of any safety problems to minimise risks to customers.
 All of these strategies will add to costs. However, if a business is seen to put customers and customer
service first, it may benefit from good publicity, word-of-mouth promotion and customer loyalty.
 LEGAL
 Employee protection: Improved employee legal protection, e.g. better health and safety at work,
redundancy pay, protection from discrimination, minimum pay levels, maternity pay
 Increases cost of employing staff – may be reluctant to expand in this country by taking on extra staff. ●
Encourages business to increase labour productivity to pay for the cost of these legal improvements. For
example, Germany has some of the most rigorous laws protecting workers rights, but labour productivity
is one of the highest in the world. ● If employers are seen to be positive about these legal changes and
accept them fully, they will appear to be a caring business that will encourage well-motivated staff to
work for them. Some businesses offer benefits above the legal minimum for this reason