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Social, cultural and demographic environment

The social, cultural and demographic environment deals specifically with the people of the community, country and target market. These could be the suppliers, investors or the buyers and their preferences. Values, tastes, traditions and culture influence their interactions with business. Businesses must be aware of the trends and changes in the social environment. These could include changes in gender and age ratios, and family

structures.

Technological environment

The technological environment is a fast-changing environment and has forced businesses to keep up-to-date with new trends. Businesses need to be aware of new technology that their competitors are developing and using. Technology has introduced new products, new production techniques and new methods of marketing.

The Internet has exposed many countries and businesses to the global market and many businesses have been forced to cut costs and prices. The Internet has given business access to information that has revolutionised systems and processes in business. The technological environment also has had an impact on the speed of production and the quality of products.

Legal and political environment

The government plays a large role in the development of policies and legal frameworks. These policies and frameworks can have a huge impact on the business environment. The government itself is also a supplier and a consumer, and often acts as a regulator in the business environment. The government is responsible for a large portion of the infrastructure and transport, which businesses rely on heavily.

Government employs a large number of consumers and changes in government salaries can have an impact on the spending patterns of consumers.

International / global environment

Changes in technology have had a significant effect on business. One of the greatest influences has been in telecommunications, which has given local business quick access to the global market via cell phones, the Internet and e-mail. The international trade possibilities have led to access to cheaper raw materials, and better quality goods and services, and have lowered production costs. Exchange rates and different interest rates have made trade a benefit for business. Businesses have been able to access international skills, knowledge and expertise, which in turn have improved innovation, production and productivity. Developments in transport have made international trade of raw material and finished products and services a more viable option.

Institutional environment

Laws and regulations have been put in place to ensure that there is a framework of legal systems for international trade as well as for different industries. Many of these institutional frameworks aim at protecting consumers, and regulating costs and prices. There are also many laws governing employment, ownership of property and government licenses and rexes. Cultural, political and economic differences have forced countries to establish an institutional framework in which to operate.