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B207 Reading 19: The External Business Environment (B209) - Coggle Diagram
B207 Reading 19: The External Business Environment (B209)
The External Business Environment (STEEPLE Analysis)
Core Idea:
The decisions and performance of a firm are affected not just by internal organisation, but by the external environment in which it operates.
Framework:
The external environment is typically audited using the PEST or, more comprehensively, the STEEPLE framework
1. Dimensions of the External Business Environment (STEEPLE)
Social/Cultural
Social attitudes, values, and trends (e.g., attitudes towards work conditions, equality, and seeking paid employment while raising children).
Affects consumer demand and workforce attitudes (e.g., increase in average age of population).
Technological
Rapid technological change.
Changes how firms produce and sell products, and how business is organised (e.g., use of robots, information technology revolution, growth of online shopping).
Economic
Whole range of economic factors (e.g., cost of raw materials, competitor price cuts, taxes, interest rates, exchange rates)
Affects business strategy and performance. Microeconomic (market-specific factors) vs. Macroeconomic (national/international situation and government policy)
Ethical
Pressure to adopt a more socially responsible attitude.
Major concern for many firms regarding Corporate Responsibility (e.g., working conditions, safety/quality of products, truthful advertising, avoiding 'suspect' practices).
Political
Actions of government and other political events.
Major events (e.g., war, change of government) or specific actions (e.g., smoking ban, minimum price on alcohol).
Legal
The legal framework in which businesses operate.
Examples include industrial relations legislation, product safety standards, and laws preventing collusion between firms.
Environmental (Ecological)
Ecological factors and growing concerns worldwide (e.g., pollution, fossil fuels, biodiversity).
Forces firms to adopt a greener approach (e.g., cleaner technologies, better waste management). Can create extra costs but also drive sales and provide finance.
2. Globalisation and the Changing Environment
Globalisation:
The process by which the external business environment is increasingly becoming a global one. The world economy is becoming more integrated and interdependent.
International trade and cross-border investment have grown much faster than countries' output and investment within their home markets
Many companies now see the world as their market and source supplies globally.
STEEPLE Factors Hastening Globalisation:
Technological
: Communications revolution (Internet, email) allows companies to communicate easily globally; reduction in size/weight of products (e.g., plastics, smaller computer chips) makes long-distance transport cheaper.
Economic:
Globalisation of markets and production; increased market competition; macroeconomic convergence (interest rates, tax rates becoming similar).
Political/Legal:
Development of trading blocs (e.g., EU, NAFTA); international agreements to dismantle trade barriers; growing influence of international bodies (e.g., WTO).
Social/Cultural:
Growing influence of Western consumerist culture as major brands sell products worldwide.
Environmental/Ethical:
Growing worldwide concern for ecological issues and human rights/decent employment conditions.