Analysis of Environmental Factors and Risks in Company Decisions

This report delves into the critical environmental factors and associated risks that companies must consider during their decision-making processes. It explores the influence of internal and external environments, emphasizing the evaluation of expected costs, political, legal, economic, technolo...Read More

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Economics
4/2/2020

Economics
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What environmental factors and risks must be considered in the company's decision-
making process?
The environmental factors are also uncertain so business decisions are made on past
predictions or by analyzing the market situation. Several environmental factors are considered
such as the internal and external environments while making the decision for the company. The
expected cost is evaluated which helps in making the decisions in the company The political,
legal, economical, technological and social factors are considered while making any effective
decision for the company. The resources in the environment and their effect are also considered
while making the decisions for the company (Franks, et al., 2014). Return on investment is the
major environmental factor that is considered by the investors while investing in the company so
the company has to maintain its brand image in the market.
While making the business decisions there are several other factors too which are taken
into consideration which are the complexity of the task, influences of the behavior of the
individual and team cohesion. The company also considered certain risk factors while making
business decisions such as market fluctuations, competition in the markets, strategic alliances,
fluctuation in the interest rates and the foreign exchange rates, financing, etc. (Govindan, et al.,
2015). The major risk which the company has to consider is related to the rapid changing in
technology evolution and technological standards.
For Example, The major uncertainty has been seen in the oil and gas industry where the
prices of oil are uncertain due to the fluctuations in the market. So it becomes difficult to manage
the running projects as environmental factors are affecting the decision of the prices. So, several
factors which are considered in the oil and gas industry are volatile oil and gas process,
competitor’s strategy, laws and regulation made by the government about oil and gas industry
and how to expand the resources to make the prices more effective.
Evaluate cost factors influencing the company's decision.
Several cost and pricing factors have a great influence while deciding on the company
such as the opportunity cost is the major factor in which the company chooses one over the other.

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Several costs are indulged in the company while making the product like cots related to the
material, labor and overhead cost (Mohammed and Knapkova, 2016). The company has to
manage this cost so the direct costs and overhead costs have a great influence on the company
while making certain decisions.
The cost of producing the products includes several factors such as R&D expenditure,
advertising cost which the company has to consider as this cost only captures the customers and
helps in gaining the market share of the company (Anatan, 2014). There are several costs
indulged with the department head so this factor also influences the decision of the company.
There are several other cost factors such as the stage of the current product life cycle, the nature
of the offering the product, etc. influence the decision of the company.
Example: The price in oil and gas industry is evaluated by certain cost factors such as
opportunity cost; cost related to the material, labor and overhead cost and many other cost
influences the decision of the company. The overhead cost is uncertain in the company which is
creating the major influence while making the decision of the company.
Determine strategies that would provide value to the outcome your company is seeking
relating to this decision.
The value of the outcomes to the company cans is attained by making the proper planning
so that the things which are affecting the decisions of the company can be considered. The
company should use the better strategies of making the budgets and eliminating the overhead
expenses so that the customer’s base can be increased and retention of the employees can also be
attained. The company should effectively use the resources so that outcomes related to the
decision can also be attained and the resources of the environment can also be not wasted (Tate,
et al., 2014). The company should make a cost-effective plan so that more profitability can be
attained. The competition in the market is increasing and everyone is providing the best quality
with the minimum prices so the strategy of the company which they have to adopt is the adoption
of the new technology and responding to the changes timely so that value in the company can be
attained.

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References
Anatan, L. (2014). Factors influencing supply chain competitive advantage and
performance. International Journal of Business and Information, 9(3).
Franks, D. M., Davis, R., Bbebington, A. J., Ali, S. H., Kemp, D., & Scurrah, M. (2014).
Conflict translates environmental and social risk into business costs. Proceedings of the
National Academy of Sciences, 111(21), 7576-7581.
Govindan, K., Rajendran, S., Sarkis, J., & Murugesan, P. (2015). Multi criteria decision making
approaches for green supplier evaluation and selection: a literature review. Journal of
Cleaner Production, 98, 66-83.
Mohammed, H. K., & Knapkova, A. (2016). The impact of total risk management on company’s
performance. Procedia-Social and Behavioral Sciences, 220(1), 271-277.
Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Tate, W. L., Ellram, L. M., Schoenherr, T., & Petersen, K. J. (2014). Global competitive
conditions driving the manufacturing location decision. Business Horizons, 57(3), 381-
390.