1.5 External Environment
Sociocultural factors: Economic factors:
• relate to the way people live and what they believe and • the demand for products and services is not the same in poor countries as
value in wealthier ones
• religion includes consideration of both dominant and • as economies develop, consumers have an increased disposable income
minority religions • businesses will respond by improving living standards by adapting what
• cuisine, what people eat, at what time, and with whom products they offer
• family life, are families large or small, family unit including • Other businesses located abroad may enter the market to sell their goods as
extended family countries become more affluent
• demographics such as life expectancy, pyramid of age • boom bust cycle (business cycle)
• health and types of diseases that are most prevalent in • during recession, consumer’s income may decrease and unemployment
the country may rise, there will also be a lower demand for consumer goods
• access to education, how long is the formal education • GDP - calculated as the total monetary value of all final goods and services
system, is there a difference between the way in which produced in an economy in a given period of time. Changes in GDP indicate
boys and girls are educated growth or recession
• what do people do in their spare time • GDP per capita - calculated by dividing total GDP by the population of a
country. GDP per capita is used to measure relative wealth or poverty of a
nation
• Recession - where GDP decrease for two or more quarters (each quarter =
Technological Factors: 3 months)
• Depression - a prolonged or particularly severe recession
• innovations in information technology • inflation - general increase in the prices of goods and services, rate of
• the commercialisation of affordable personal computers inflation measured using consumer prices index and retail prices index
• internet and mobile phones, then smartphones • deflation - a decrease in prices, less common than inflation, does occur
• technology has blurred the line between work and leisure when economies slump, or when technological advances lead to a reduction
• new software and applications that can reduce costs and in cost
open new markets for businesses • Interest rate - cost of borrowing and reward for saving
• increasing availability of big data that can be exploited • unemployment rate - calculated as the percentage of the labour force that
by companies to understand and meet the needs of their is out of work but actively seeking employment at a given time
clients • Imports - goods brought into a country
• nanotechnology and genetic engineering • Exports - goods manufactured in a country and sold abroad
• technologies such as 3d printing, artificial intelligence • exchange rates - cost of one country’s currency in terms of another
and robotics are driving change country’s currency, essentially the purchasing power
• mobile phones and renewable energy have enabled
developing countries to progress without passing
through the stage where basic infrastructure such as
telephone and electricity lines have to be set up
Political factors:
Legal Factors:
• what is the political regime
Environmental Factors: in a particular country - • businesses must abide by all
constitutional monarchy, existing laws and regulations
• the quantity and quality of available fresh water
parliamentary democracy, • companies must obey laws in
• large amounts of water are essential for agricultural
use and power production presidential democracy, their home countries and in all
• climate change one-party state or a the countries where they operate
• alteration of weather patterns and increased frequency military dictatorship • some companies hire lobbyists
of extreme weather, can also be the cause of legal • is the political situation to influence legislation that will
constraints imposed on companies stable or is there civil have an impact on business
• international regulations such as the Paris Agreement unrest • companies can be sued by
• protect species and their habitats • are elections coming up governments for anti-competitive
• can limit development of some businesses • is political landscaping practises, by employees for
• medical and pharmaceutical business may support changing with the unfair practises, and by
this as they look in nature for sources of advancement
emergence of new consumers for producing harmful
• challenge of how to recycle or dispose of waste
political parties or potentially harmful products
• air quality
• compliance with pollution regulations can be • how friendly are the • minimum wage for workers,
expensive different political players Working Times Regulations 1988
to business interests
Ethical factors:
Consequences of change in the STEEPLE factors:
• ethics are the moral principles that govern ones actions
and behaviour • companies must constantly be on the look out for changes in the
• companies are criticised for marketing products that may external environment
not be in the customers best interest such as alcohol and
tobacco • some changes will be seen as opportunities whilst others will be
viewed as threats
• treatment of workers and working conditions
• minimum wage vs living wage • the ability of organisations to thrive in a changing market will
• unfair labour practises determine whether they survive and prosper
• zero hour contracts • IBM has managed to stay competitive in an industry experiencing
• pricing policies such as predatory pricing rapid change
Sociocultural factors: Economic factors:
• relate to the way people live and what they believe and • the demand for products and services is not the same in poor countries as
value in wealthier ones
• religion includes consideration of both dominant and • as economies develop, consumers have an increased disposable income
minority religions • businesses will respond by improving living standards by adapting what
• cuisine, what people eat, at what time, and with whom products they offer
• family life, are families large or small, family unit including • Other businesses located abroad may enter the market to sell their goods as
extended family countries become more affluent
• demographics such as life expectancy, pyramid of age • boom bust cycle (business cycle)
• health and types of diseases that are most prevalent in • during recession, consumer’s income may decrease and unemployment
the country may rise, there will also be a lower demand for consumer goods
• access to education, how long is the formal education • GDP - calculated as the total monetary value of all final goods and services
system, is there a difference between the way in which produced in an economy in a given period of time. Changes in GDP indicate
boys and girls are educated growth or recession
• what do people do in their spare time • GDP per capita - calculated by dividing total GDP by the population of a
country. GDP per capita is used to measure relative wealth or poverty of a
nation
• Recession - where GDP decrease for two or more quarters (each quarter =
Technological Factors: 3 months)
• Depression - a prolonged or particularly severe recession
• innovations in information technology • inflation - general increase in the prices of goods and services, rate of
• the commercialisation of affordable personal computers inflation measured using consumer prices index and retail prices index
• internet and mobile phones, then smartphones • deflation - a decrease in prices, less common than inflation, does occur
• technology has blurred the line between work and leisure when economies slump, or when technological advances lead to a reduction
• new software and applications that can reduce costs and in cost
open new markets for businesses • Interest rate - cost of borrowing and reward for saving
• increasing availability of big data that can be exploited • unemployment rate - calculated as the percentage of the labour force that
by companies to understand and meet the needs of their is out of work but actively seeking employment at a given time
clients • Imports - goods brought into a country
• nanotechnology and genetic engineering • Exports - goods manufactured in a country and sold abroad
• technologies such as 3d printing, artificial intelligence • exchange rates - cost of one country’s currency in terms of another
and robotics are driving change country’s currency, essentially the purchasing power
• mobile phones and renewable energy have enabled
developing countries to progress without passing
through the stage where basic infrastructure such as
telephone and electricity lines have to be set up
Political factors:
Legal Factors:
• what is the political regime
Environmental Factors: in a particular country - • businesses must abide by all
constitutional monarchy, existing laws and regulations
• the quantity and quality of available fresh water
parliamentary democracy, • companies must obey laws in
• large amounts of water are essential for agricultural
use and power production presidential democracy, their home countries and in all
• climate change one-party state or a the countries where they operate
• alteration of weather patterns and increased frequency military dictatorship • some companies hire lobbyists
of extreme weather, can also be the cause of legal • is the political situation to influence legislation that will
constraints imposed on companies stable or is there civil have an impact on business
• international regulations such as the Paris Agreement unrest • companies can be sued by
• protect species and their habitats • are elections coming up governments for anti-competitive
• can limit development of some businesses • is political landscaping practises, by employees for
• medical and pharmaceutical business may support changing with the unfair practises, and by
this as they look in nature for sources of advancement
emergence of new consumers for producing harmful
• challenge of how to recycle or dispose of waste
political parties or potentially harmful products
• air quality
• compliance with pollution regulations can be • how friendly are the • minimum wage for workers,
expensive different political players Working Times Regulations 1988
to business interests
Ethical factors:
Consequences of change in the STEEPLE factors:
• ethics are the moral principles that govern ones actions
and behaviour • companies must constantly be on the look out for changes in the
• companies are criticised for marketing products that may external environment
not be in the customers best interest such as alcohol and
tobacco • some changes will be seen as opportunities whilst others will be
viewed as threats
• treatment of workers and working conditions
• minimum wage vs living wage • the ability of organisations to thrive in a changing market will
• unfair labour practises determine whether they survive and prosper
• zero hour contracts • IBM has managed to stay competitive in an industry experiencing
• pricing policies such as predatory pricing rapid change
