Analysis Of The External Environment Of Business

1663 words - 7 pages

Analysis of the External Environment of Business

A ‘business' is commonly defined as an organisation which provides goods or services in addition to transforming input into output. Its objectives can either be profitable or non-profitable. One of the main requirements that must be fulfilled for a business to exist is that it must act and react to activities and occurrences beyond that of the organisation. These factors that happen outside of the business are known as external influences or factors. They have a major influence on a business with respect to the main internal functions and occasionally their objectives and strategies. However, the overriding factor that affects most business is the degree of competition between themselves and another business that provides the same product or service. Other significant influences are social, legal, economic, political and technological factors.
Technology is defined as ‘the sum of knowledge of the means and methods of producing goods and services' (Penguin Dictionary of Economics- The Business Environment, Worthington and Britton). It is also ‘increasingly science based, encompassing things like chemistry, physics and electronics, and refers to the organisation of production as well as the actual techniques of production itself.' (The Business Environment-Worthington and Britton)
The major technological factor that affects business is technological change, in particular, the rapid pace of change in production processes and product innovation. As a result of this, new products are introduced, adjustments to the organisation and method of production are implemented, alterations to the quality of resources and products are made, and new ways of distributing the product and storing and disseminating information are set up. The substantial changes in technology have had varying impact upon business and the economy and the effects are many and varied.
A major technological change is the developments that have been made in information technology and the use of computers. These are mainly to improve the efficiency and competitiveness of business, and as the changes in technology are so rapid, there are important implications for businesses. Such developments prompt businesses to transform existing activities within the business in addition to generating new ones. New activities mainly involve the handling, analysis, collection and transmission of data. These advancements have varying impacts on business, such as improvements of goods and services within technological change in production. This is mainly due to computer-aided manufacturing (CAM), computer-aided design (CAD) and computer-integrated manufacturing (CIM). CAM means the computer controls the machinery, CIM is where the computer controls the whole production line, and CAD enables the computer to help design products using computer generated models and 3D drawings. The effects these implementations are having on...

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