Analysis of Environmental Factors Shaping Modern Business Practices

This essay provides a comprehensive analysis of the environmental factors that significantly influence modern businesses operating in a globalized world. It identifies and discusses both micro and macro environmental factors, including suppliers, customers, competitors, technological advancements, political climates, and socio-cultural trends. The essay explores how these factors shape business operations, decision-making processes, and overall success. Furthermore, it emphasizes the importance of adhering to ethical norms and sustainability practices in order to maintain a positive corporate image, avoid government restrictions, and foster employee satisfaction. The essay concludes by summarizing the impact of these external factors and highlighting the need for businesses to adapt and respond effectively to these dynamic environmental changes.

INTRODUCTION
Modern businesses are very dynamic as they have to operate in global environment and is
affected by various factors. These factors include both micro as well as macro environmental
factors. This essay will include identification and discussion of various environmental factors
that have changed the nature of modern businesses in this globalised world. Furthermore, the
essay will also include; why it is important to follow ethical norms and sustainability.
MAIN BODY
Nowadays every organisation wants to operate globally in order to grow and expand its
business. In order to operate globally, the companies have to change the ways in which they are
operating currently such as they have to adopt advanced technology, fulfil corporate
responsibility and ethics in business(Hamilton and Webster, 2018). Even if the company wants
to operate effectively all across the world; it is essential for it to have a clear understanding of the
impact of various external environmental factors on the business. These external environmental
factors include both micro as well as macro environmental factors.
Micro environmental factors are those factors which directly affect immediate business
operations of the business as well as its decision making. These are those factors which are
within the reach of the company and could even be controlled. They include factors such as
suppliers, customers, competitors and so on. These factors have changed the nature of modern
businesses in a way that is discussed below.
Suppliers are those people who supply material as well as labour as per the demand made
by the business organisations. They play a important role in adopting a purchase policy which
gives bargaining power to the business organisations. It affects the nature of modern business
because if the company manages to get easy availability of material or labour and at low cost
then it would be able to achieve economies of scale which in turn will give the businesses a
competitive advantage over other companies that are operating in the same industry all over the
world(Jayashree and et.al., 2016).
Customer are those people who buy the goods or avail the services. They are the most
important factor of external environment because without customers there is no existence of
company. They affect the nature of modern businesses because in order to grow and expand
1

every company should make efforts to grab more and more customers by restricting not only to
the national boundaries but also attracting the customers of other countries as well.
Competitors are those people or organisations which are competing against each other.
They play a major role in affecting the nature of modern businesses because when an
organisation operates at global level it attracts competition from companies of all over the world.
This, adversely affect the smooth running of the business organisations.
Macro environmental factors are those factors on which the company has no control.
These factors include technological environment, political environment, legal environment, socio
-cultural environment and so on. Technological environment is concerned with innovation as
well as up-gradation of technology(Miller and Jentz, 2017). They affect the nature of modern
businesses because nowadays it is very important for every organisation operating at global level
to adopt advanced technology otherwise it wont be able to survive in this competitive
environment and lag far behind them.
Further, political environment has also contributed in change of nature of modern
businesses because the companies have to now gain complete knowledge of the political
environment of all the countries in which the company is operating so as avoid unnecessary
restrictions imposed on the company by the political party in power. Even the legal environment
has changed the nature of modern businesses as now it is very essential for them to have
knowledge about legal issues or laws of all the countries in which the company is carrying out its
activities; otherwise it will lead to spoiling the image of the company. Furthermore, social
cultural environment has changed the nature of businesses because now the culture and values of
all the societies in which the business is operating has to be managed by keeping in view the
recent trends, lifestyle, opinion and values of various cultures or society.
It is very important for individual and organisations to manage responsibly, sustainably
and behave ethically towards various social, cultural, economic and environmental issue
otherwise it will wont be able to survive in this fast changing world(Will and Mueller, 2019).
Apart from this, if the company fails to fulfil its corporate social responsibility then it would
loose its image in the mind of customers because when a company fulfils its social obligations, it
is viewed as a socially responsible enterprise and helps in building up the image of the company
which would in turn also hinder the smooth running of the business. Moreover, if the company
fails to fulfil economic and environmental issue then it wont be able to beat its competitors and
2

thus would not be able to gain competitive advantage as well as it will damage the environment
which is injurious for health of not only the employees of the organisation but also for the entire
society. Other reasons which leads to importance of individuals and organisations to manage
responsibly is to avoid unnecessary government restriction which may lead to complexities in
carrying out the business smoothly. If the organisations are managed responsibly then it would
contribute towards the well being of the employees which in turn would help in creation of job
satisfaction in the mind of employees by developing a sense of belongingness as well as it helps
in motivating the employees(Zinovieva and et.al., 2016).
CONCLUSION
From the above essay it has been summarised that there are various external
environmental factors that affect the working of the business. These factors include micro
environmental factors such as customers, suppliers, competitors, intermediaries, general public
and so on. While on the other hand, macro environmental factors also have an impact on the
working of modern businesses such as technological factors, environmental factors, legal factors,
political factors, socio cultural factors and so on.
3

REFERENCES
Books and journal
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford
University Press.
Jayashree, S. and et.al., 2016. Impact of external factors on implementation of ISO
14000 EMS towards corporate sustainability. International Information Institute (Tokyo).
Information. 19(7A). p.2631.
Miller, R.L. and Jentz, G.A., 2017. Business law today: The essentials. Cengage
learning.
Will, M.G. and Mueller, J., 2019. Change Management: The Organization as a Micro–
Macro System. In Management for Scientists (pp. 99-111). Emerald Publishing Limited.
Zinovieva, C.G. and et.al., 2016. Study of external and internal factors affecting
enterprise’s stability. Advances in Systems Science and Applications. 16(1). pp.62-71.
4