Significance of External Factors in Business Economics

Signifi dismissce of External Factors in Business EconomicsContents inventionSocial factors and their signifi chamberpotce when it comes to dividing line- sparingsLegal and policy-making Legal and Political Factors in the SLEPT summaryEconomic factors and their bend on descent frugalstechnical factors and duty economics evidenceReferencesIntroductionMaintaining the current martplace sh atomic number 18, or being capable of growing in terms of market share, in this continuously ever-changing valet means that assembly linees fucknot afford to stand still. In severalise to keep ahead in the impertinence of increasing global competition, companies must c stomachly follow ontogenesiss in their outside environment, which consists of society, reas angiotensin converting enzymed systems, economic factors, These factors are interrelated and are capable of significant spay.The diligence chosen in order to analyze these factors and to which fulfilment familys should take the se factors into note is the institutionalizeline industriousness. The external environment in which respiratory tracts operate is particularly volatile and difficult. on the whole the factors mentioned above hold up a striking impact on the air duct industry in particular. therefore the airways industry is deemed to be an adequate proxy for the analysis.In an attempt to analyze the external factors in order to evaluate how and to which extent companies should assess these external factors the SLEPT method will be used, i.e. an investigation of the Social, Legal, Economic, Political, and Technological influences on a business. Further much the reactive and anticipatory addresses will be discussed to evaluate which is more useful. In this business relationship the following airlines will be used to explain the theory supplied United Airlines and virgin Atlantic. These were chosen, because of the differences in size of it and ways of operational.Social factors and their s ignificance when it comes to business-economicsBy Rink SikkesSocial factors consist mainly out of cultural factors and social trends, namely health consciousness or consumer lifestyle. They as well as consist out of demographic factors, for case age distribution and population growth.Every culture has different wants and pauperisations, so when a business fair focusses on provided one culture or group of throng, other(a) cultures might feel unexpended out and they will be less stringed to the corporation its service or product. For this reason a business indispensablenesss to modify its business strategy to a large variety of cultures. To achieve superior guest service Virgin Airlines has done query into cultural mixed bag and they offer their staff take aiming in cultural a state of wareness. This way they are able to identify every cultural nuance tingeing customer satisfaction.1 This suggests that businesses have to put a substantial tally of effort into focusin g on cultural diversity as they can increase customer satisfaction when they do that.It is crucial that businesses make their customers feel spell when they use their products or serve. Businesses can lay emphasis on their safety in order to attract more customers. When businesses are struggling to guarantee safety they attract fewer customers the 9/11 attacks had a sizable impact on Virgin airlines and United Airlines, as the public was frightened to travel by airplane as there was a sound terrorism threat. Especially US domestic flight of steps revenue decreased enormously right after these attacks, but when the threat decreased the revenues increased again.2 This shows that gage has a significant effect on business economics.When a lifestyle of a substantial amount of consumers shifts into a new phase, a company might suffer a severe drop or a sudden surge in market share depending on how the company focusses its product or service. For instance Virgin Airlines offers the opt ion to hire an extra place for extra own(prenominal) space. This is a great opportunity for couples who want any(prenominal) privacy during a flight, or families who pick out extra space for their children. at that place are also certain(p) shifts that cannot be influenced, but have a large influence on business-economics, For example the increased popularity of traveling abroad has been very beneficial for British Airways and Virgin Airlines, but they have not had any influence on this sudden shift in lifestyle, so lifestyles of consumers have a large impact on business economicsA business can focus its services and products on people that have a certain amount of health consciousness, but it can also alter its products so they are attractive for any customer regardless of their health consciousness. For example Virgin airlines and British airways have to account for obese customers that might take more room and more fuel. To carry on profitable, they are obliged to either in duce a so called fat tax, where customers have to pay more when their weight is above a certain level, or sell the customer a second seat because they do not fit in a case-by-case seat.As we have demonstrated, every single one of these factors has a major of impact on business-economics. They are also essential for the success of businesses since the lives of customers wrap more or less these factors. A business should adapt its strategy proactively to these factors in order to increase its profit and market share.Legal and Political Legal and Political Factors as external factorsBy Catello AlvinoPolitical and Legal factorsPolitical and legal factors (which are closely related to each other) heavily affect businesses, profoundly influencing their modus operandi. When new laws and regulations are approved, companies and corporations are forced to change their business strategies, sometimes with considerable effects, sometimes with almost any consequence. In the following paragraph s, some example of laws and regulations affecting businesses are being analyzed.Tax policiesTax policies can poorly change the amount of profits that a firm is able to make. It is well known that each untaught applies a different tax policy, thus offering endless possibilities for a firm to choose its home base location, considering the pros and cons of each single situation. Firms having strong relationships with their national government, might be able to get tax exemptions and change their competitiveness towards their international rival In fact, in the Russian Federation, in 1997, the flag carrier Aeroflot enjoyed a tax exemption by their government on the purchase of four Boeing aircrafts. This for original reduced the operating costs for Aeroflot and increased their competitiveness towards the other Eurasian companies who whitethorn not have enjoyed the same privilege. some other(prenominal) example of tax policies affecting the businesses is the tax increase on the air lines industry that occurred through the years, especially in the US. It is shown in table 1 that taxes have considerably gone up, thus increasing the slate harm and losing some customers who cannot afford a flight ticket to certain destinations anymore, often deciding to switch to train travel.Table 1, source http//www.airlines.org/Pages/Government-Imposed-Taxes-on-Air-Transportation.aspxTrade UnionsTrade Unions are a great achievement conquered by the work class in the last two centuries but a sometimes, unpredictable danger for companies. If not handled carefully, working class leaders, especially in western countries where concepts of democracy hold, can seriously damage a company performance. Companies need to engage into a stable relationship with them in order to avoid sudden stoppages of their services, which can lead to serious profit dischargees. For example in 1985, United Airlines experienced a 29 geezerhood long strike which resulted in huge losses in revenues. The company negotiators were able to restore the firm normal functioning only after multiple discussions and trade-offs with the workers representatives. This of course could have been avoided with a proactive behaviour, making sure that working conditions were optimal, or moving the company to a country where trade unions are easier to manipulate. Wars and changes in international relationshipsFor companies operating outside their national borders, good and stable relationships between countries are crucial. A war or a diplomatic misunderstanding can turn into a forced exit from some markets or in a loss of revenue. Before deciding to operate in a certain foreign country, a firm should deeply analyze the on-going relationship with its government. Moreover, once they decide to be in business with this hypothetical country, they should be ready to react to any possible event modifying the national political situation. This can turn extremely necessary for companies operating in unstable countries like Southern American, or Eastern European countries. For example, with the recent outbreak of a serious protest in Venezuela, probable airlines passengers may think twice before deciding to travel there. This change in public opinion has for sure reduced the revenue of many companies, including United Airlines, which provides flights from the US to the capital city, Caracas.Economic factors and their influence on business economicsBy Sybren DijkstraThe economic factors constitute a highly important phase of strategy growth for business economics, since economic factors have direct impact on the potential attractiveness of various business ventures. It is highly likely that the economic factor will have a substantial effect on business economics, however it is very hard to take all the variables into account. A direct reactive approach is considered wise when it comes to the economy. Multiple variables, which cover a large part of the economy will be discussed in this section in order to test the hypothesis personalised wealth, competition and governments.The effects of changes in personal wealth can have a substantial effect on business economics globally. individualized wealth is a combination of multiple variables, such as GDP per capita growth, engage rates, inflation rate, unemployment rates, fiscal policy, and fiscal policy. Personal wealth can therefore be used as a proxy for the economy. For example, when the interest rates rise people are more likely to safe their money and that affects to which extent people are willing to consume. When comparing the amount of passengers carried (figure 1) and the world GDP per capita (figure 2) they seem to be correlated. The image is sustain by the revenue stream in figure 3.The hypothesis that a decrease in personal wealth directly affects revenue, hence business economicsAn equally important part of the economic appraisal is identifying potential competitors and ascertaining strengths, weaknesse s, opportunities, threats, and possible strategies. Knowing your competitors, remains to be one of the key factors to success. Weaknesses of competitors can signify external opportunities, while major competitive strengths can pose key external threats. The more competitive learning is collected, the easier it becomes to outsmart the competition. Virgin Atlantic proved this point. It had a marketing budget less than a one-third of what British Airways had for marketing, due to focused advertising and outsmarting the competition Virgin Atlantic was able to publish a profit of 68 million pounds, while British Airways had to report a 401 pound operating loss in 2009.Governments form the last, but equally, important part of the analysis, since they have the power to implement and alter economic policy. Governments create the legislation and frameworks in which businesses compete with one another. From time to time the government will change these rules and frameworks forcing businesse s to change the way they operate. Business is thus keenly affected by government policy. The airline industry for example had to cope with higher landing charges as well as additional taxes imposed on the airtravelling public directly affecting the revenue and profit.Combining these three factors in the economic assessment in the SLEPT analysis suggest a confirmation of the hypothesis stated at the descent of this section. Personal wealth, used a proxy for state of the economy, might be directly affecting business economics. Competitors and governments are also capable of directly affecting business economics. This suggests that the economic factors require a pro-active attitude, since its crucial to stay ahead of competition and that this can only be done by staying up to date on the new policies and the state of the economy.Technological factors and business economicsBy Ewan TauranTechnological factors affect business economics in a wide variety of ways. They play a strong fiber in the external environment of a firm and should be carefully assessed. Technological work out can reduce costs, improve quality and lead to innovation. These developments generally benefit both firms and consumers. However, the effects of expert age can be very diverse. Failing to keep up with technological trends can cause serious economic damage. The assessment of technological factors is crucial for high-tech industries such as the airline industry.The constant development of technology caters to the growing need of firms to meet issues of sustainability and safety. As mentioned earlier, there are progressively strict legal rules regarding the materials that need to go into aircraft construction in order to make them safer and more resistant to fire hazards. The rules regarding venting and climate effects are also becoming increasingly strict. Due to technological progress, airline industries can adopt newly developed technologies and conform to these new laws and regulat ions. As mentioned before, airline industries also encounter another issue that of increased safety inevitably and wants by consumers resulting from the terrorist attacks of 9/11.ET1 In this specific case, adopting new air transportation security technology can help airline industries address these safety issues.ThoughET2 it is the case that the airline industry employs technology extensively in its operations, they rely on aircraft producers such as Boeing and Airbus for their aircraft. With respect to aircraft technology, airline industries are limited to these aircraft producers. Therefore it is important for firms to take advantage of technological advancement in other elements of their operations. An example could be to employ more advanced technology in the front office of an airline industry. This can improve customer service which can result in an increase in ticket sales and consequently overall revenue. Another factor that should be taken into account by firms is technolo gical advancement with respect to social media. Currently, social media is becoming increasingly important to firms all over the world as an effective marketing tool. Airline industries should realize this and adapt to the changing circumstances regarding this global trend.Technological advancements do not always have positive effects on business economics. For example, technological progress with respect to communication and the exchange of information can have serious effects on the demand for air transportation. Technological innovations such as videoconferencing limits the need for face-to-face meetings in business, consequently making the need for air travel obsolete. Individuals who live far apart geographically no longer have to chew out each other physically when the opportunity to communicate digitally presents itself as a decent low-priced alternative.Due to the rapid development of technology, firms should stay focused and adapt quickly in order to put up in an increas ingly competitive economic climate. At the moment, technology progresses so riotous that it is becoming increasingly hard for firms to promptly adapt. Firms who fail to adapt can miss out on all of the potential positive effects from technological advancement and as a consequence lose market shareET3.ConclusionWhen taking all the SLEPT analysis factors into account, they seem to suggest that each and every factors should be taken into account and that each factor requires a pro-active approach. Firstly, the social part of the analysis demonstrates that each and every single one of these factors has a major of impact on business-economics. They are also essential for the success of businesses since the lives of customers revolve around these factors. A business should adapt its strategy proactively to these factors in order to increase its profit and market share. Secondly, the research done on political and legal factors also suggests that these factors require a pro-active attitud e towards these factors. Thirdly, the economic analysis suggests that the economic factors require a pro-active attitude, since its crucial to stay ahead of competition and that this can only be done by staying up to date on the new policies and the state of the economy. And lastly the technological part of the analysis suggests that due to the rapid development of technology, firms should stay focused and adapt quickly in order to survive in an increasingly competitive economic climate. At the moment, technology progresses so fast that it is becoming increasingly hard for firms to promptly adapt. Firms who fail to adapt can miss out on all of the potential positive effects from technological advancement and as a consequence lose market shareET4.However the research for this report does not cover all industries, just the airline industry was used as an example, also the cost of keeping up with all these factors would be astronomical. To come up with a more definitive conclusion more research is required.ReferencesIATA. (2014).FACT SHEET Industry Statistics .Available http//www.iata.org/pressroom/facts_figures/fact_sheets/Documents/industry-facts.pdf. Last accessed 30 April 2014.Indexmundi. (2011).GDP per capita (PPP) (US$).Available http//www.indexmundi.com/g/g.aspx?v=67c=xxl=en. Last accessed 30 April 2014.11 http//www.intersperience.com/images/Virgin Atlantic Case Study.pdf2 http//seekingalpha.com/article/120335-domestic-air-travel-lowest-since-postminus-9-11ET1I need to change this sentence.ET2Paragraph is missing a proper topic sentenceET3Conclusion needs more bodyET4Conclusion needs more body