Social issues
An increase in the size of the population or the average age of the population in a
country can affect the level of demand and the types of products people buy.
Technological issues
A change in the availability and speed of the internet can make it easier to find suppliers
and sell around the world.
Economic issues
The amount of income in an economy can change over a period of time, affecting
demand; the value of one currency in terms of another can alter, affecting the cost of
importing supplies; and the cost of borrowing can go up, increasing costs.
Environmental factors
Growing concerns about emission levels and the sustainability of production may affect
how a business produces and what resources it uses.
Political factors
A government may sign a trade agreement which makes it easier for businesses to sell
their products abroad.
Legal factors
New laws by a government can prevent the promotion of some products (such as
cigarettes) and can affect the way employees must be treated and the way a business
produces (perhaps to reduce its environmental impact).
Ethical factors
Consumers are increasingly concerned about how businesses behave and whether
they do the 'right' thing. For example, a business may decide not to use a certain
supplier because of the poor working conditions it provides for its employees.
The dynamic business environment
Businesses do not operate in isolation. Whatever they do is linked to what other
businesses do; for example, their suppliers, the firms that distribute and promote their
products, the banks that lend them money. They are also affected by many other
external factors, as shown in Table 1.1.1.
• Table 1.1.1 STEEPLE analysis
These external factors (known as STEEPLE - social, technological, economic,
environmental, political, legal and ethical) will continually be changing and this will affect
what businesses produce and the resources they use. These factors all can have an
impact on a business, as shown in Figure 1.1.6. STEEPLE is simply a way of
categorizing the factors in the external environment and organizing these under
different headings. This can be done in other ways - for example, some business writers
refer to PEST (Political, Economic, Social and Technological) or PESTEL (Political,
Economic, Social, Technological, Environmental and Legal).
External factors can affect:
• the demand for products
• the costs and availability of inputs
• the nature of the transformation process.
If labour costs in one country become more expensive, for example, businesses might
switch production to another country or start to use more machinery instead. If a
government signs a treaty with another country to make trade easier, its businesses
might start to sell more to customers in the new partner country. New laws may make
certain products or production techniques impossible. Businesses therefore need to
monitor their external business environment because it is dynamic (ever-changing). If
necessary, managers will need to change some of their decisions about inputs, the
transformation process or the out puts they produce accordingly.
Economic
Social
Legal
Technological
Business
Political
Environmental
Ethical
• Figure 1.1.6 External influences on a business
CASE STUDY
Lockdown
In 2020, the Coronavirus (COVID-19) pandemic
there were concerns over how well economies would
affected countries all over the world. Governments
do. Businesses had closed down and people had lost
reacted in different ways, but in many countries
their jobs. There had been a change in working patterns
shops were forced to close and people were 'locked
with more people working from home and a change in
down' at home for several weeks. Many businesses shopping patterns with more online
purchases. such as restaurants simply could not operate at all.
