Page 13 - Business_Studies_F5

Student's Book Form Five

Components of the external tariffs, labour laws, consumer laws, safety
environment laws, trade regulations, competition laws,
The external environment includes a environmental regulations, political will,
variety of elements, some of which are and intellectual property right laws.
explained as follows: Changes in political stability can create
uncertainties and challenges for businesses
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Economic environment: This encompasses that may require them to adapt their
factors such as market conditions, strategies and operations accordingly.
macroeconomic indicators, and economic
policies that impact businesses’ operations Technological environment: This comprises
and performance. It includes elements such innovation, advancements in technology,
as inflation rates, market forces, Gross and digitalisation that influence businesses
Domestic Product (GDP) or economic across industries. It includes factors such
growth, interest rates, exchange rates, as artificial intelligence, automation,
unemployment rates, purchasing power, information technology, and digital
and overall market demand. These platforms. Embracing technology enables
factors significantly influence businesses’ businesses to enhance their performance
sales, costs, profitability, and investment in terms of productivity, efficiency,
decisions. competitiveness, innovation of new
products, quality of products, and ability to
Social environment: This reflects reach customers through digital channels.
the societal attitudes, trends, health
consciousness, values, and behaviours that Competitive environment: This comprises
shape customer preferences, demand, and rival businesses, industry structure, market
business practices. It includes demographic dynamics, and competitive forces that
factors such as age distribution, population influence businesses’ competitiveness
size, levels of income, literacy levels, as and market positioning. It includes
well as cultural diversity. Understanding factors like competitors’ strategies,
social dynamics helps businesses to tailor strengths, weaknesses, and market share.
their products and marketing strategies to Understanding competitive environment
meet the needs and expectations of diverse dynamics helps businesses to identify
customer segments effectively. opportunities, differentiate their products,
and develop effective strategies to gain a
Political and legal environment: This competitive edge in the market.
reflects how the state or government
regulates the economy. It encompasses Global environment: This encompasses
government policies, laws, regulations, international factors, trends, and events that
and political stability that impact impact businesses as a result of globalisation.
businesses’ decisions and operations. It includes factors such as international
It involves factors such as tax policies, trade, climate change, ecological

Business Studies for Advanced Secondary Schools 4

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Business Studies FORM 5.indd 4
Business Studies FORM 5.indd 4 30/06/2024 19:02:28