Question

1. Why is it important to monitor and assess changes in the external environment ? What approaches and frameworks might organisations use to do this ?

2. For ONE of the following environments, identify two key changes taking place and explain how these changes might impact on both large and small businesses? Choose one of

• the demographic environment

• the political environment

• the digital environment as the subject of your answer

# I want it in reference please.

Answer 1

External environment include all those factors in the outside environment which effect the working of business. The changes in working of the business is reflected by the outside factors. They can be of micro or macro nature. Micro factors of environment have direct impact on the business where as Macro factors of environment don't have direct effect on business but they effect its success or failure.

It is important to assess the changes in external environment because it effects the working of the business. By assessing the changes taking place in the external environment , the businessman can be aware of the opportunities or risks that business might face in near future. They can plan their actions accordingly. It also help the business to form strategies which will help them to have advantage over the competitor. It reduces the risk of failure or losses.

PEST analysis or PESTLE analysis is the most widely used method to monitor the changes in external environment .It includes study of political, economic , social and technological factors.

1) Political factors- It considers the present situation of economy politically and the effect of political policies on business or economy.It includes study about taxes , government stability , regulations etc.

2) Economic factors - It considers those factors which will effect the economy .It guides the economy about its direction.They study different rates like inflation , interest , foreign exchange rate and unemployment rate etc.

3) Social factors - It includes study of lifestyle, gender , culture , education , wealth etc.All these factors effect the working of business.

4) Technological factors- As technology keep on changing every day , it's important for business to study technologi factors to keep the business updated. It includes study about technology obsolescence, new innovations, advances etc

5) Legal factors- It means the regulatioms that effect the business working . It involves study of regulations in the field of competition, safety , product, health etc.

6) Environmental factors - It means to study those factors in the outside environment which will have effect on business effeciency like weather , location , people behaviour towards environment etc.

To understand the effect these external factors in a more better way , the following things can be done -

1) Cleary understand the factors related to the environment in detail.

2) Gather all necessary information.

3) Recognise the opportunities for the business.

4) Identify the risks that the company might face.

5) Then tale the final decision.