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There are a various factors that affect business activity. Not all of the external factors exist all the time. There are situations where some have a bigger influence than the others. Here are a few external factors and how they might affect a business.
The Government affects a business in many ways by making laws, issuing taxes and also how well the government improves and maintains their infrastructure. In some countries may be pro-business and in others it may not. The infrastructure has to be good to encourage more businesses to come into the country. Only if the infrastructure is good will the transportation of goods be easy, thus encourage businesses.
The economic climate is a highly influential external factor. Economic climate is how a country’s general economic condition is. Just like the health of a person, the economic climate is decided by a lot of factors such as the inflation rate, increase/decrease % of GDP etc. If the inflation rate is high then it may be bad for bad for some businesses because in times of inflation people tend to spend less money. On the other hand if the economy is booming then the business can flourish.
The world events that take place all around the world will affect the businesses around the world. It is just as Isaac Newton said in his 3rd law of Motion “Every action has an equal and opposite reaction.” If there was a war then business of making arms would be in high demand. The demand for groceries and other supplies would increase. In the mean time business like window cleaner and barbers would get affected because no one is bother about these things during a war. In recent years the price of gas has always been increasing. However, as global warming takes its toll the winters get cooler and it was found there was a significant reduce in the price of gas during winters because the demand of gas for heating purposes had come down.
Competition is when 2 or more businesses exist in the same...