Essay on Describe and Analyse the External Environment of...

The external environment is the external context within which an organisation exists and operates.1 One of the ways in which the external environment can be analysed is by assessing the impact of politics, the economy, social factors and technological factors (P.E.S.T. analysis). The organisations are affected either generally or immediately by the external environment. The immediate factors, also referred to as the operational environment, include aspects such as suppliers, financial institutions, customers and labour markets. The general features, or the contextual environment, comprise of the economic, political, legal and technological influences, for example. The political environment has an affect on businesses because†¦show more content†¦The government has to control inflation because unemployment can be caused, because firms have to reduce costs and reducing staff is an easy way to do this and effective for luxury good companies because demand will be less so theref ore they will not have to produce as much, hence not as many staff will be required. Unemployment therefore needs reducing because as ‘Phillips Curve suggests inflation is higher when unemployment is high. International trade is affected because foreign countries will receive a less favourable exchange rate and they may therefore reduce trade with UK companies, which again affects their profits. The government can use contractionary policy to reduce inflation and this reduces demand. They can increase taxation, reduce government spending or do both. By doing both they are relating to Fiscal policy and by taking in more money than they spending, for example on unemployment benefits, they reduce consumer power and therefore aggregate demand will fall. This therefore slows down the economy and makes it more stable. A recession would have the opposite effect to inflation of there being a larger supply than demand, which results in lower priced goods. For example the pound would be worth more and consumers would have a larger disposable income to spend on luxury goods and services. This would be tackled in the opposite way to inflation by the governmentShow MoreRelatedDescribe The Strategic Management Process1200 Words   |  5 PagesDescribe the strategic management process. What does it mean to manage strategically? 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This concept has been applied and tested around the world and is already used in organizationsRead MoreSwot Nespresso1695 Words   |  7 PagesExecutive Summary INDEX NESPRESSO COMPANY INTRODUCTION Internal and External Analyses Introduction of the model The methodogy used to analyse Nespresso Business Model is ‘Business Model Generation’ by Osterwater and Pigneur 2009. The methodology uses a model named Canvas, which divides the business model into 9 segments. The concept is simple, relevant, and understandable to analyse a company. 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