5 Main Factors That Affect Business Environment-Must Read!

The factors that affect business environment refers to those factors which affect the way a business runs its operations and they consists of external factors i.e. those which the business might not have direct control over e.g. infrastructure, and internal factors i.e. those which the business has some control over e.g. finances.

To give you a clearer picture of what the factors that affect business environment are, let’s look at what the Business Dictionary describes them as.

Definition Of The Factors That Affect Business Environment

The combination of internal and external factors that influence a company’s operating situation. The business environment can include factors such as: clients and suppliers; its competition and owners; improvements in technology; laws and government activities; and market, social and economic trends.

Now that we’re all on the same page, let’s look at what the 5 main factors that affect business environment are.

Factors That Affect Business Environment #1: Infrastructure

Infrastructure refers to the physical facilities needed to start and run a business and it has a direct influence on the growth of an economy i.e. if your country has good infrastructure in place, then chances are your economy is doing better than the economies of countries with inferior infrastructure.

Infrastructure is among the external factors that affect business environment and although a business might not have control over the entire infrastructure in a particular region, you should at least try to position yourself in an area where the infrastructure can support your business operations.

Factors That Affect Business Environment #2: Business Related Incentives

This refers to any incentives provided by the government to promote the spirit of entrepreneurship and encourage investors to set up shop in a particular country. As one of the factors that affect business environment, incentives play a bit part in attracting entrepreneurs.

Examples of incentives include:

• Import and export incentives e.g. reduced rates in taxation or reduction in particular costs
• Free lease of land subject on some set conditions
• Reduced taxation rates
• Low interest loans

Factors That Affect Business Environment #3: Personnel Training

The level of skill and knowledge that your staff has in the execution of their duties has a direct influence on how well your business operates.

It’s therefore important to ensure that all your staff members have the right form of training to enable them to carry out their responsibilities efficiently. One of the ways to ensure your staff has the right training would be to pay for them courses which would equip them with a specific skill that is beneficial to your business.

You should also treat your staff well; it would be a pity to invest in a particular staff member only to have them snatched by your competitor.

Factors That Affect Business Environment #4: The Market

This refers to things such as pricing policies, regulatory policies and investment incentives just to mention a few. A business might have some control over some of these factors.

It’s important to ensure that your prices are competitive so that you can also have a fair chance at attracting customers through your door. Setting them too high might see you get a few sales and setting them too low might see you go out of business but this depends on your nature of business.

Factors That Affect Business Environment #5: Competition

Competition is good for business in that it ensures customers get value for their money. Unless you want your competitors to leave you behind or take you ought of business, you need to ensure you’re offering your customers competitive prices to make them come back.

You should however not go overboard by adopting fraudulent techniques to make the factors that affect business environment work for you.

My Take On The Factors That Affect Business Environment

If you’re an entrepreneur, then you need to know how to deal with the factors that affect business environment as they have a direct effect on the way your business operates i.e. they determine whether your business will succeed or fail in the long run.

Although no one business have direct control over the external factors that affect business environment, no effort or resource should be spared in making sure that you’ve got the internal factors that affect business environment covered and working for you instead of against you. If you can do something about the factors that affect business environment, then please do!

There are many more factors that affect business environment out there in addition to the above so feel free to do your research to see which other factors affect a business.

Well, that’s it for now but please comment below and share if you found value in the above post on the 5 Main Factors That Affect Business Environment,