Summary
Highlights
Businesses cannot control external influences, but awareness and responsiveness are crucial. Changes in the external environment present both opportunities and threats, impacting a business's survival, growth, or decline. Key influences include technology, legislation, and the economic climate, which will be explored using Amazon as an example.
Technology is a rapidly changing external influence. Amazon constantly assesses technological advancements like AI, cybercrime, big data, digital communication, and robotics. AI improvements, such as algorithms for targeting users and machine learning for product recommendations, require substantial investment in skilled labor. Robotics, including drone and scout delivery services, enhance efficiency and customer service. Amazon leverages these advancements for delivery improvement and customer experience, and their strategy evolves with technological progress.
Legislation, comprising laws passed by Parliament, demands businesses' strict adherence. Non-compliance can lead to fines, criminal charges, or business closure. Employment laws like the minimum wage act and working time regulations directly affect Amazon's operating costs, and changes can force strategic decisions like workforce reduction or relocation. Health and safety laws also impact operations. Globally, Amazon must navigate diverse legislative landscapes.
The economic climate, affected by factors like interest rates, unemployment, inflation, and recessions, significantly impacts businesses. Low unemployment generally indicates a healthy economy, increasing consumer spending, revenue, and profits. In prosperous times, Amazon might invest in expansion. During a recession, Amazon might adjust its pricing strategy, introduce budget ranges, or reduce non-essential costs as consumers have less disposable income. Continuous monitoring and adaptation to these external influences are vital for long-term success.