Analysis of the External Environment of Business 1

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Analysis of the External Environment of Business

In today's highly competitive market, businesses must be aware of the environment in which they operate and the external factors that influence them. These factors can affect the main internal factors of the business and its objectives or marketing strategies. The external environment is rarely stable and many of the external forces can change quickly and dramatically and are usually beyond a firm's control. Although some external factors can pose a threat to a business, they can also create new opportunities. In order to assess their environment, a business may use a PEST analysis structure to evaluate the external influences or macroenvironmental factors that could affect the
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The quantity of labour can depend on the population size, for example, and the quality of labour can depends on things such as the level of health care, education and training.
Also, the age of the population has some bearing on business. The ageing population in which we live is currently having an affect on business as well as creating one in the future. The demographic time-bomb will create an increasingly dependent population, leading to an increase in the demand for healthcare, social services, state pensions and social security arrangements, for example.

Businesses are not only influenced by their immediate markets but also by markets at different spatial levels, such as local, regional, national, supranational and international levels. For example, the regional redistribution of the population will affect a wide range of businesses from housing to transport and the local labour market. Local and national factors will be most important for small businesses but larger companies will need to consider the environment in any countries in which they do business, as well as the global scene. Carrying out a PEST analysis may also provide help for businesses when attempting to enter a new market, especially one in another country. Analysing possible social barriers to entry, such as language, dominant religion or different attitudes towards foreign products or services can prove
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