The Importance of External Factors: The Needs and Expectations of Stakeholders

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The importance of external factors: The needs and expectations of stakeholders No matter how well-planned or well-run an organization may be, external factors can cause even the best strategic plan to go awry. A rapid, unexpected change in the economy can cause credit to dry up or demand to contract. New technology can render the product obsolete or open up new opportunities to save on production costs. Changes in political leadership or government regulation domestically or internationally can likewise impact a firm, such as when regime instability can stymie the supply of critical input goods. That is why environmental scanning is essential for all effective organizations. "External analysis is important to be done in order to identify current and future threats and opportunities of a firm. Any firm should know its position and performance in the business, so that it can plan strategies that can help it to further compete and stay in the business. A firm should optimize all the opportunities to maximize its output and at the same try to avoid any possible threats that might affect the firm's performance" (Ghani et al 2010: 53). The major external variables that can affect a firm are comprised of social, legal, economic, political, and technological factors. Socially, changes in society (such as more women working) can affect employee needs and behaviors as well as the buying habits of consumers. Legal prohibitions can create serious obstacles or facilitate the
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