We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

In Business, what is the External Environment?

By Florence J. Tipton
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

The external environment normally refers to outside forces that may influence an organization. Two factors make up the external environment: task and general. The task environment typically consists of external groups that may have an influence on daily operations of an organization. In the general environment, outside forces may influence an organization’s ability to do business.

Generally, the task environment has dimensions that are directly interactive with how an organization operates. The task environment may include competitors, customers and suppliers. Since these dimensions may influence daily operations, more attention is usually devoted to each during strategic planning.

Competitors may drive the organization’s market plan for advertisements and product positioning. The competitors may exist in several different categories beyond organizations that offer similar products or services. A competitor in the external environment could be one that offers a substitute product to customers, like purchasing a motorcycle rather than a car. Another could be an unrelated business vying for the same property in a thriving community.

Customers are individuals or entities willing to pay for an organization’s products or services. For some organizations, customers may consist of individual consumers. Additionally, customers could be other businesses or institutions. Changes in customers’ purchasing habits may have an influence on the organization’s external environment.

Suppliers are vital to providing the resources necessary to develop the products or services. Some organizations may choose to work exclusively with one or more suppliers, while others may use several different companies. Working with a variety of suppliers may insulate the organization from potential setbacks if an exclusive supplier goes out of business.

The influences of general factors within the external environment are typically vague and might have long-term consequences. Each dimension is indirectly interactive with the operation of an organization, but may still influence business decisions. These dimensions include economic, technological and sociocultural influences. Political climate and global influences also factor in.

The economic dimension typically refers to the fiscal health of the area where the organization operates. Usually, the factors may involve high unemployment and inflation, which may determine economic growth. For example, with high unemployment, the demand for the organization’s products or services may decrease.

The technological dimension generally covers the methods used to develop products or services. The technology used within the organization—tools and applications—typically comes from the external environment. Advances in technology may improve the organization’s competitiveness.

When an organization considers sociocultural influences, it may look at the cultural norms and behaviors of people. Other characteristics may also include demographics and customs. Sociocultural influences might help to determine which types of products or services may appeal to society.

Changes in the political climate may relate to business regulations that could either stifle or facilitate growth. The relationship an organization has with the government could influence business operations. A pro-business environment and political stability could determine the viability of business markets.

A flatter world from transportation and technology advances also factors into the external environment of business. Global influences may add pressure to an organization, even in places where business operations do not exist. Foreign competition for similar products or services may threaten profits.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Discussion Comments

By Certlerant — On Feb 06, 2014

General influences on external business environment are factors that are generally out of a company's control, like changes in the national or local economy.

To combat unexpected changes that will hurt business, a company needs to have the best marketing team possible in place.

A good marketing team should be able to adjust to a changing business environment and advise management on what will sell and what is less likely to while the company rides out the downturn.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.