External Environment of a Business

The External Environment in Business

The external environment of an organization comprises of all the things found outside the business that affect the organization's operation. The external environment is an important force because it assists management in formulating future goals while taking into account potential external dangers that may impede their efforts to attain these goals. Having knowledge of external factors also aids in making the right decisions to ensure that business activities progress smoothly. This paper will explain how political, legal, and social variables influence organizations' and their stakeholders' business activities (What Is An External Environment In Business? 2017).

Political Factors in China

Political factors which affect the operations of businesses in China include government regulations; the government usually sets the rules and directions which guide the way businesses carry out their operations. When the government changes these rules the organizations should change their operations to ensure that they comply with the requirements. All these changes usually have effects on the businesses and its stakeholders as it modifies guidelines set to achieve certain goals (PEST Analysis Of China, 2015).

The Government's Support in the UK and China

The government of UK and China help business organizations by offering loans and grants to the upcoming enterprises in order to ensure that they can operate without any financial difficulties. The government also gives training to the management of these organizations in order to equip them with the skills necessary to run the business efficiently. Another political factor which affects business operations is the lack of political stability. When a country experiences riots, all the business activities are disrupted and investors may be discouraged from investing in such organizations anymore. In cases of riots, most companies are looted, which may affect their operations and can lead to disclosure. The employees of such companies end up being jobless and the shareholders may lose their shares, hence incurring huge losses. In a period of political unrest in a country, many companies do not hire new staff and also they cease producing goods and services due to the fear of suffering losses. This affects the local communities as they do not benefit from the companies through job creation (PEST Analysis Of China, 2015).

Impact on Starbucks in China and the UK

For instance, political factors have a significant impact on the business of Starbucks in both China and the United Kingdom in several ways. The sourcing of materials is one of the factors which most of the politicians are always concerned about. Due to this, the company will try all its level best in order to follow all the legal procedures. In addition, Starbucks will have to adhere to the rules of the other countries where they purchase their raw materials (PESTLE Analysis Of Starbucks, 2015).

Legal Factors and Their Impact

Legal factors are those factors outside the business, which regulate operations of a business and the activities of the customers. This factor includes consumer law which is put in place for the protection of consumers from the employers who may be planning to mistreat them. Also, the consumer law helps in protecting the rights of the customers. Employment law is another instrument to protect the rights of the employees of an organization. There are minimum salaries which the employees should be paid and this can affect the kind of job opportunities a company is able to offer. Further, there is competition law which gives direction on how the companies should compete with each other. For example, a company cannot copy the brand name used by another company. These legal factors affecting business operations in the United Kingdom are not found in China because they do not have the experience in these legislations. Moreover, China does not have any regulations which protect the rights of consumers and employees. The legal factors affect Starbucks because it should ensure that they have followed all the laws and regulations in all the countries where they do business (PESTLE Analysis Of Starbucks, 2015).

Social Factors and Business Operations

There are several social factors which affect the operations of businesses in the United Kingdom and China. Firstly, there is the demographic characteristic, which affects the way business is operated. A company should consider factors like age, income, and geographic region before producing goods and services, especially when entering new markets. In addition, changes in lifestyles have affected the business operations because people are able to use technology and can make modern choices. For example, customers are able to compare the goods and services offered by several companies and make their choices. Companies should, therefore, study the customers' needs before producing their goods. Attitude to work is also another social factor which affects the operation of a business. When employees have a positive attitude they can be able to work hard in order to achieve the goals of the organization (PEST Analysis Of China, 2015).

Impact on Starbucks and Conclusion

However, if the employees have a negative attitude towards work they may not be able to meet any of their set goals and hence failing the organization. Changes in the demographic factors affect Starbucks because they have to offer goods at lower prices in order to be able to include those customers from lower and middle-income. Due to changes in lifestyles, they have to research for the needs of all their customers in order to reach better consumer satisfaction. Work attitudes also have made Starbucks change their work patterns so as to ensure that employees have a positive attitude (PESTLE Analysis Of Starbucks, 2015).

In conclusion, the external environment has great impacts on the operation of businesses, which could enhance its development or, contrarily, restrain its growth. Therefore, company management should ensure that they consider all the factors before making their decisions.

Works Cited

What Is An External Environment In Business? (2017). Study.Com. Retrieved on May 20, 2017 from http://study.com/academy/lesson/what-is-an-external-environment-in-business-definition-types-factors.html.

PEST Analysis Of China. (2015) PESTLE Analysis. Retrieved on May 20, 2017 from http://pestleanalysis.com/pest-analysis-of-china/.

PESTLE Analysis Of Starbucks. (2015). PESTLE Analysis. Retrieved on May 20, 2017 from http://pestleanalysis.com/pestle-analysis-of-starbucks/.

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