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External Factor
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Explanation
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Examples
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Social
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- The extent to which personal attitudes and values, culture and demographic change are expected to affect the business including
- Social mobility
- Education
- Ethics & Religion
- Migration
- Health profile
- Population growth and demographic structure
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- Greater numbers of people graduating from university have increased the quality of workers available to European businesses
- A more health-conscious population provides a lucrative market for businesses selling fitness and lifestyle products
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Technological
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- The extent to which technological change and innovation are expected to impact the business including
- Research & development
- Production and distribution processes and efficiency
- Quality and new materials
- Intellectual property
- Online presence
- The technology used in communication
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- Developments in communication technology have reduced the need for business travel
- Rapid developments in technology have reduced the length of product life cycles and increased the need for businesses to carry out ongoing research, development and innovation
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Economic
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- The extent to which economic indicators are expected to directly impact business performance including
- Inflation
- Exchange rates
- Cost of living
- The stage of the Business Cycle and GDP growth
- Unemployment levels
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- High rates of fuel and food inflation in parts of Europe have reduced the level of disposable income for most households
- A historically low unemployment level has made recruitment more challenging for many EU businesses
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Environmental
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- The extent to which changes in attitudes and government policy towards environmental protection as well as the impact of global warming expected to impact the business including
- Changing infrastructure - for example in favour of green transportation networks
- Energy availability & cost
- Disposal of materials
- Changes in climate and weather patterns
- Air quality
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- Increased interest in environmentally responsible and ethically-produced goods has created new markets for businesses to exploit
- Strict rules on the disposal of commercial waste have increased costs for businesses
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Political
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- The extent to which local and national government is expected to influence the business including
- Government stability and relationships with key trading partners
- Tax regulations
- Trade restrictions
- Political Ideology and attitude to Business
- Fiscal policy
- National security status
- Investment in public services
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- The UK’s decision to leave the EU in 2016 has led to the reintroduction of trading restrictions for British businesses importing goods from suppliers in Europe
- The reduced level of threat from terrorism in Ireland has helped to boost tourism
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Legal
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- The extent to which changes in law and regulations are expected to impact the business including
- Taxation
- Employment
- Advertising
- Health & Safety
- Compliance and ‘red tape’ created by regulatory bodies such as the Health and Safety Executive
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- Changes to the level of tax levied on high sugar products (sodas) across Europe has increased selling prices and prompted some businesses to redevelop their product to reduce the sugar content
- A rise in the level of the minimum wage increases business staffing costs
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Ethical
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- The extent to which moral principles ought to be considered in the decision-making process, for example
- Being truthful about products and using responsible marketing practices
- Paying staff and suppliers on time and in full
- Trading fairly
- Being accurate and realistic about financial performance
- Avoiding discrimination
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- Many supermarkets have implemented 'above and beyond' policies related to the sale of alcohol and tobacco and require customers to prove that they are significantly older than the minimum legal age of sale
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