Posted at 12.15.2018
Businesses are destined to come across several forces every time they are functioning. In some instances, these causes are over and above their control. Regardless of this reality, there is no solo business which can can be found without going through the external environmental forces. It is therefore imperative for a small business establishment to place into consideration all the possible exterior forces which may affect its businesses either positively or negatively. In this respect, opportunities and threats are worthy of noting because they take into account the exterior factors which would often have an effect on an enterprise environment. Once the external factors are believed and concurrently compared with the internal factors, it will be possible for an enterprise management to formulate the right regulations of dealing with the inescapable external pushes. This paper explores a few of the main forces in the exterior environment which might create uncertainty for organizations today.
Some of the factors which might cause doubt in the external business environment are limited needs of customers, technical changes, restrictions and eradication of foreign obstacles which may hinder trade. These factors fall under opportunities which a small business can equally devise methods of profiting from them. In addition, some of the exterior factors which become risks and also create doubt in business include shifts in the likes and personal preferences of consumers, introduction of products which can be substitutes of the current ones, new trade procedures and also multiple barriers to operate (Samson & Daft, 2009). These uncertainty factors are discussed at length below.
Each customer has a unique need when buying goods and services. To be able to retain customers, an enterprise must fulfil their needs which may keep changing from time to time. These changing customer needs aren't certain and may not be possible for an enterprise management to anticipate accurately. Nevertheless, some customer needs are clear and can be catered for right away. For example, friendliness is a common need of customers. They'll always appreciate warm pleasant and also to be acknowledged (Campbell & Craig, 2005). Customers need to be embraced and made comfortable as soon as they step into business premises to make their acquisitions. In addition, most customers will appreciate if they're understood in the whole process of buying goods and services. Simple and tender language is necessary when conversing to customers. This should go along way with how the same customers are cared for, whether pretty or unfairly. Fairness should dominate at all times if customers are to be retained. This can be very tricky for an enterprise organisation bearing in mind that the needs of customers are not the same and may evenly change as time passes. In a nutshell, when the needs of customers aren't met, it could create a significant business risk and uncertainty in future owing to the fact they form the main backbone in a small business as they complete the route of syndication (Jackson, Joshi & Erhardt, 2003).
A business organisation cannot exactly specify when the existing technological applications will become obsolete and new ones launched. That is indeed one type of business uncertainty. There are many factors which might increase changes in technology. For example, when business performance is hampered for an extent which it cannot reach its peak, new varieties of technology may be created in to the market site. This goes hand in hand with competition which often requires better and well improved technological applications. In case the capacity of creation is below the required capacity which can meet market demand, technology can equally be transformed to meet up with the deficit. Furthermore, dynamics throughout the market which may result in a change in the needs of clients can also necessitate the necessity for advancing the current technological platform (Jackson, Joshi & Erhardt, 2003).
All these factors are extremely instrumental in the change of technology. Subsequently, it is nearly impossible for business organisations to combine and analyse each one of these factors in developing a high level of certainty either in the next to or faraway future. Nevertheless, new technology may not necessarily guarantee optimum performance and hence, it could be considered to be a subsidiary external business environment element in the dedication of uncertainty level.
Factors which hinder trade on a global range are also regarded as external and they may become impetus or promoters of business on a local level (Pahl & Richter, 2007). Specifically, obstacles to international trade will come at a time whenever a business organisation gets the least expectation. These barriers can be placed set up either by the coordinator country or the international treaties on regulations regulating trade. Businesses might not exactly be in a position to tell when bilateral or multilateral trade agreements will come into force and for that reason, uncertainty on the part of a business company is brought on board. Some of the trade barriers which may cause uncertainty are reviewed below:
In this form of trade hurdle, the number of goods being imported to the sponsor country is manipulated. The quantity of the brought in commodity in the local market is usually minimal and this translates to high market price of the same.
Tariff obstacles include those restrictions on imported goods which entail imposition of tax and tasks. The quota system is also used in tariff obstacles. The rate of taxation may go up or down at any moment hence accounting to one of the uncertainties which business organisations face (Mercer, 1998). High taxation on imports will imply that the price of the goods imported will be very high. However, if these tasks and taxes are lowered, the home market will be flooded with imports hence affecting the consumption of similar products produced locally.
A country may opt to intentionally stop the importation of certain goods. This measure may be studied to protect the local companies from facing harmful competition. It is a protectionist policy which might be enforced or withdrawn at any time. Hence, it generates uncertainty to businesses as an external force.
This is one of the very most uncertain factors emanating from the exterior business environment. Consumers' likes and choices are sophisticated in character. Business organisations take care of thousands of consumers every year whose likes and preferences vary from time to time. One cause of this change is believed to be the acquisition of pertinent information regarding the availability and top features of certain products in the market (Mercer, 1998). Once comparisons are drawn, some consumers are highly likely to shift their personal preferences, a phenomenon which can't be predicted by business organisations. Nevertheless, there are those consumers who may resort to change to other product basically because of excitement. When and why such changes you can do is not within the site and control of business organisations. This may also be a potential risk to the development of the business.
Products that happen to be substitute of each other can be created in to the market and heighten competition. It really is an external danger and its own eventuality can't be foretold. Products that happen to be substitutes of the other person for instance Tv set collections of different brands can only just secure a larger share of the marketplace if they appeal more to consumers. Factors such as price and choice may determine which swap product will bring the day. Business organisations can overcome this threat by developing a strategic market arrange for their products.
Not all substitutes launched into the market may be threats to an enterprise organisation. A couple of factors which determine whether such substitutes are risks or not. For instance, the hazard to the industry can be high if the consumer considers the price of shifting to the alternative product to be negligible and at the same time achieve the desired taste. In addition, if the price of the substitute is leaner compared to the industry one, it implies that the threat of that particular alternative will be higher to the existing business organisation (Jackson, Joshi & Erhardt, 2003). On the same note, if both replacement and the strong product will be the same in conditions of quality, the threat will similarly be high traveling some consumers into consuming the new alternative product. Finally, a substitute product can be considered a threat if all the other important product attributes of the substitute is higher that the firm product. These conditions will definitely create a high risk to the industry and are equally uncertain.
It is definitely factual that customers in a business company play cardinal role due to the fact they complete the route of distribution without which the aim of development will not be met. The main reason why production takes place is to fulfill human desires. If customers aren't incorporated in the process of production, the second option will be a fitness in futility. Besides, customers can be labeled under opportunities and threats which businesses face. when they change their likes and choices or their needs aren't sufficiently catered for, they can immediately impact the performance of a business. Businesses can utilize this factor as an chance to gain access to wider market. Similarly, customers can be a great risk to business organisation when they decide to switch their preference to an alternative product especially when the latter has a higher merit than that of the industry (Campbell & Craig, 2005). Therefore, I consider customers to be the most important factor so far as the exterior business environment can be involved.
Nevertheless, this affirmation may well not apply in a situation whereby a firm gets the monopoly of a market in which the price of goods depends upon the sole company while consumers haven't any choice to make. Such a corporation situation will also breed an imperfectly competitively market whereby market causes of demand and supply are not handled by consumers. The single company regulates elasticity of source and demand and as a result, customers merely bridge the syndication gap.
To recap this newspaper, it is imperative to underscore that the external environment of an business organisation encompasses hazards an opportunities that are usually beyond the control of a business. These external factors also cause uncertainty in the procedure of business because they can not be forecasted.
Over and above the elements of an external environment of a firm, customers are very fundamental due to the actual fact that complete creation channel.