Effect Of The External Environment On Firms †MyAssignmenthelp.com

Question: Discuss about the Effect Of The External Environment On Firms. Answer: Introduction This report focuses on how the environments in which the firms operate have become an important deal and the factors affecting it. The development of business in India has been changing at a rapid pace majorly due to the changes in the economic policies of the government. In the environmental issues, there are factors that affect the businesses. There is a close link and relation between business and its environment (Prajogo, 2016). It generally helps in making the business strong by making use of the resources. Therefore, every firm must keep an eye on the factors that affect the work culture of the firms. Business environments can be economic and non-economic. However, business environment is the summation of all the factors to the business firms since they majorly influence their functioning. Background Information This report discusses about how the various factors has an effect on the environment of the businesses. Factors like government regulatory, customer behavior, economic policy, competitor strategy and public opinion have an impact on the success of the firm. These environmental factors cannot be ignored since they have a huge potential effect on the firms (Savrul, Incekara Sener, 2014). Wesfarmers is an Australian firm that has faced trouble and challenges globally. The surroundings have affected the business environment of Wesfarmers. However, the alterations in the business environment are unpredictable. Predicting the economic and social changes in the business environment becomes a challenge to predict. The environment of the business varies from country to country. Businesses have different values in different country. The external factors that affect the environment of the business cannot be controlled. It comprises of competitors, suppliers, economic, political, technological and social factors. The term business environment defines external forces and institutions that affect the functioning of business enterprises. Environmental analysis helps the businesses or firms to scrutinize the strategies of the competitors and then create their own strategies depending on the strengths and weaknesses. The two most significant factors include government policy and economic conditions and customer behavior (Tortoriello, 2015). Every organization has problems regarding these factors. Discussion a) Effect of the external environment on firms - As mentioned earlier, there are factors that affect the environment of the business. Wesfarmers being an Australian firm gets affected by these factors. The environment in which the firm operates is an important point. Firstly, the role of economy is considered as one of the factors affecting the environment. In a bad economy, a well run business might not be able to carry on (Alcacer Delgado, 2016). For instance, if the customers lose their jobs or take up jobs that will support them, their willingness to spend more will decrease especially on luxury goods and cars (Saeed et al., 2015). Wesfarmers must have these following points to exist globally. High interest rates on credit cards depresses and constraints the customers from spending much. Comprehending the threats and opportunities of the economy will help to control the environment of the business firms. Secondly, the business firm must be unique enough to cope up and deal with the competition. When a firm is created, it needs to compete against the established and experienced businesses in the same existing industries ((Bolmn Deal, 2017). Once the business firm is established, it will naturally face newer firms that try to cut off the customers. Competition is the most common external factor that affects the environment of the business. Thirdly, the changes in the policies of the government have a major effect on the business firms. The political factors are therefore associated with the management of public affairs and its collision on the business. Maintaining a political stability in the trade is essential. It is concerned with the relationship between business and government within a country (Cheng, et al., 2014). Generally, the stability of the government persuades the business activities related to it. However, along with the competitive business environment and trade unions show maturity and contributes positively for the success if the business o rganization. Fourthly, along with the employees of the company, customers and suppliers play the most significant role in businesses. Suppliers have a major impact on the costs of a business firm (Kerzner Kerzner, 2017). The power rests with the customers depending on the conditions of the products. Customers help in the growth of the business and gives sale to the company. Suppliers and customers play the role of demand and supply when related to the products of the business firm. Alteration in the needs and attitude of the consumer also has an impact on the business (Cruz-Gonzlez et al., 2015). Business firms needs to update its product depending on the habits, taste and lifestyle of the customers. Fifthly, the external environment of a business is impacted by the legal climate. Corporate taxes, government regulation, sales tax and other import duties can have an effect on the company. Due to the changes in health and environmental regulation it forces the company to change. Econ omic environment of a company includes the economic conditions, policies and economic system. The set of economic factors also have a massive influence on the business corporations. The government keeps altering these government policies from time to time for the developments that usually take place in the economic scenario. The economic policies constitute of the monetary, fiscal, industrial, foreign investment and export-import policies. There are social policies as well which constitute the society as a whole along with its priorities and preferences, which means consumption pattern and purchasing power of the society. However, good business management is not only about how an individual deals with the factors but the way they respond to the factors (Bolmn Deal, 2017). Therefore, these external factors affect landscape and the activities of the business firms. b) Appropriate frameworks to resolve the challenges faced by firms - By applying appropriate framework in business firms, the challenges faced by the companies can be resolved. A framework is set up for solving ethical problems in the organization by implementing the course of action (Tietenberg Lewis, 2016). The employees of the organization should aim on the framework to solve the problems by strategic thinking and problem solving skills. In order to ignore and avoid the mistakes, necessary steps needs to be followed. Firstly the domain of the company must be researched thoroughly and also their existing competition. Managers should be recruited for doing this job. Failing to do this job will hamper the organization. The employees must be trained to carry out these activities for eliminating the hassle and problems. Secondly, identifying the affected parties is essential as that party can provide with relevant facts. Thirdly, the issues involved with the organization whether ethic al, professional, and organizational or personal needs to be solved for the betterment of the situation of the business firms. Fourthly, the fundamental principles involved should be checked as to how they are affected. There are threats to compliance with the fundamental principles of the organization. The principles include professional behavior, advocacy, confidentiality, integrity, profession, legislation, regulation and work environment. Fifthly, the organizations internal process of employing should be referred and reviewed ((Savrul, Incekara Sener, 2014). Sixthly, the alternative courses of action should be considered and evaluated. The organizations policies, procedures and guidelines should checked and improved if there is any kind of problem. The policies should be based on the applicable laws and regulation. Lastly, after implementing the course of action the procedure should be monitored. Conclusion and Summary Lastly, it can be concluded by observing that the external environment in which the businesses work alters frequently and quickly. The factors as discussed above mainly include the political, economic, technological and social alterations that put pressure on the organizations ((Savrul, Incekara Sener, 2014).. With the help of monitoring and auditing the external environment it will become easy to grab and maximize the opportunities. The appropriate framework must be applied properly in order to reduce the challenges faced by the firms. The ethical environment should be developing since the environment is changing and so is the human activity. Every organization has its separate external and internal issues to take care of. The process is to identify and analyze the problems of the organization by using proper methods or theories of management (Inayat, et al., 2015). Therefore, the organizations is an open system and its external environment is up to a series of relationship that in fluence each other. Its services and products influence the external environment. 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