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External Factors That Will Affect Your Business

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Most business owners will spend the majority of their time preoccupied with the internal factors that contribute to their company’s health.

Negotiating with supply chains and dealing with employees is a day-to-day part of the job, but it’s equally important that you also keep your mind on the bigger picture and consider how changes on the outside, often outside of your own control, can be affecting you.

External Competition

Almost every industry is made up of multiple companies selling similar products or services. Richard Branson once noted that, “If you want to be successful in business, you need to welcome your competition with open arms – just don’t let them walk all over you.

Focusing all of your energy on what the other companies in your industry are doing will inevitably lead to your own company’s output falling.

You need to instead strike the balance between being informed on their products, yet still remaining mindful of what’s happening with your own team. After all, the grass isn’t always greener on the other side.

Socioeconomic Changes

Socioeconomic factors include everything from legal or political law changes to economic effects.

For many entrepreneurs unfamiliar with running a company, these aspects can be easy to overlook. For instance, government restrictions on overseas trading has the potential to have a devastating effect on your supply chain.

Meanwhile, Touch Financial recently reported that the current inflation rate is still below the targeted 2% of the current government, which could affect your plans for capital expenditure and increase the cost of production for goods.

Hot button topics like this also have the potential to affect your customer’s overall attitudes towards your business, so it pays to stay on top of the popular opinion.

Technological Advancements

Finally, keeping on top of advances in technology is one of the most important factors of running a business, whatever the marketplace you find yourself in.

All companies, no matter what size and which industry they’re based in, are now highly dependent on technology to function, so being aware of new services and how to utilize them could give you the competitive advantage that you need to have the edge over your competitors. It’s important to remember that no industry stands still.

If you’re not able to adapt to the changes, you could find yourself falling out of favor with consumer demand as they move on to the next big thing.

9 COMMENTS

  1. I would have guessed NOT focusing on your competition will affect your business! You need to keep your enemies real close, you know the saying 🙂

  2. Technological advancements are IN, so to speak, so I totally agree with your last point of view. Staying up to date with the latest trends in tech shows clients you care about your business and you’re willing to invest in it and take your time to improve yourself.

    • They are IN, that is true, but it is also for a reason, and that is that they are helping drive business. I do think that sometimes it can be an overreach though, and you start to wonder about people taking things too far, but on the whole it is working for companies to invest in the latest and greatest.

  3. Competition, keep your friends close but your enemies closer 🙂
    There’s just one problem though, nowadays people look an awful lot at how much they will spend on a product. So, the thing is, many clients prefer to pay lot less for a bad product, just to save money, instead of looking at your good product as an investment. It’s wrong, I know it, they know it, everyone knows it. So how do you avoid it?
    Because in this case, you simply cannot welcome your competition with open arms!

  4. This is actually right up the ally of the things we are studying right now, so it is interesting to see them being applied to some real world examples. Environmental scanning is a big time part of a lot of businesses these days, and understanding the risks and threats, and potentials, that exist our there for your organization is critical in being efficient and successful. An internal scan is also need too, though.

  5. I see a lot of small businesses losing out on a lot of money because they didn’t take the time to keep up with the current technology and this is such a shame. I think they should take more time to make sure that their business is on par with others in their niche and keep up when it comes to technological advancements.

  6. Technology is very important but there are many other perhaps less glamorous external factors, such as late payments by suppliers that can have a dramatic effect on your business. It just takes reliance on one customer who suffers a cash flow delay due to a dispute (for example) to bring down the whole supply chain.

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