Significance of Exterior Factors in Business Economics



Social factors and their value when it comes to business-economics

Legal and Politics Legal and Political Factors in the SLEPT analysis

Economic factors and their affect on business economics

Technological factors and business economics




Maintaining the existing market talk about, or being with the capacity of growing in conditions of market show, in this continuously changing world means that businesses cannot manage to stand still. In order to keep ahead when confronted with increasing global competition, companies must tightly follow innovations in their exterior environment, which consists of: culture, legal systems, economic factors, These factors are interrelated and are capable of significant change.

The industry chosen in order to analyze these factors also to which extent businesses should take these factors into account is the flight industry. The external environment where airlines operate is particularly volatile and difficult. All of the factors mentioned previously have a great impact on the flight industry in particular. Which means airlines industry is regarded as to be an enough proxy for the research.

In an effort to investigate the exterior factors in order to evaluate how and to which magnitude companies should determine these external factors the SLEPT method will be utilized, i. e. a study of the Sociable, Legal, Economic, Political, and Technological influences over a business. Furthermore the reactive and anticipatory methods will be reviewed to judge which is more useful. With this report the following airlines will be used to explain the idea provided: United Airlines and Virgin Atlantic. They were chosen, because of the differences in proportions and means of operating.

Social factors and their significance as it pertains to business-economics

By Rink Sikkes

Social factors consist mainly out of social factors and public trends, specifically health awareness or consumer lifestyle. They also are made up out of demographic factors, for example years distribution and inhabitants growth.

Every culture has different wishes and needs, so when a business just focusses on only one culture or group, other cultures might feel overlooked and they will be less drawn to the business its service or product. For this reason a business must improve its business technique to a sizable variety of ethnicities. To achieve superior customer service Virgin Airlines has done research into ethnical diversity and they offer their staff training in cultural awareness. This way they are able to identify every social nuance affecting client satisfaction. [1] This suggests that businesses have to put a substantial amount of effort into focusing on cultural variety as they can increase customer satisfaction when they do this.

It is essential that businesses make their customers feel save when they use their products or services. Businesses can lay emphasis on their safety in order to appeal to more customers. When businesses are struggling to ensure safety they appeal to fewer customers; the 9/11 problems had a big effect on Virgin airlines and United Airlines, as the general public was frightened to travel by airplane as there is a serious terrorism threat. Especially US home flight revenue reduced enormously right after these attacks, but when the threat decreased the income increased again. [2] This implies that security has a substantial influence on business economics.

When a lifestyle of a substantial amount of consumers shifts into a fresh phase, a corporation might put up with a severe drop or an abrupt surge in market share depending about how the business focusses its service or product. For instance; Virgin Airlines supplies the option to hire an extra seats for extra personal space. That is a great chance for couples who would like some privacy during a flight, or households who demand extra space for their children. There's also certain shifts that can't be inspired, but have a huge impact on business-economics, Including the increased recognition of traveling in another country has been very beneficial for British Airways and Virgin Airlines, but they have not had any influence on this sudden change in lifestyle, so life styles of consumers have a sizable effect on business economics

A business can focus its products on people that have a certain amount of health consciousness, but additionally, it may change its products so these are attractive for just about any customer regardless of their health consciousness. For instance; Virgin airlines and United kingdom airways have to account for obese customers that might take more room and much more fuel. To stay profitable, they are simply obliged to either induce a so called excess fat tax, where customers need to pay more when their weight is above a certain level, or sell the client a second seat because they do not fit in a single seat.

As we've demonstrated, every single one of the 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 company should adjust its strategy proactively to these factors to be able to increase its income and market show.

Legal and Politics Legal and Political Factors as external factors

By Catello Alvino

Political and Legal factors

Political and legal factors (that happen to be closely related to each other) greatly affect businesses, profoundly influencing their modus operandi. When new laws and regulations are approved, companies and companies are forced to change their business strategies, sometimes with extensive effects, sometimes with nearly every consequence. In the following paragraphs, some exemplory case of laws and regulations affecting businesses are being analyzed.

Tax policies

Tax guidelines can critically change the amount of profits that a firm is able to make. It really is well known that all country applies an alternative tax plan, thus offering infinite possibilities for a company to choose its head office location, taking into consideration the benefits and drawbacks of each sole situation. Firms having strong associations with their national government, could probably get duty exemptions and enhance their competitiveness towards their international competitor; Actually, in the Russian Federation, in 1997, the flag carrier Aeroflot liked a taxes exemption by their federal government on the purchase of four Boeing aircrafts. This for sure reduced the operating charges for Aeroflot and increased their competitiveness towards the other Eurasian companies who may well not have loved the same privilege. Another exemplory case of tax policies affecting the firms is the duty increase on the airlines industry that took place over time, especially in the US. It is shown in table 1 that taxes have considerably risen, thus increasing the ticket price and dropping some customers who cannot manage a flight solution to certain areas ever again, often deciding to switch to train travel.

Table 1, source: http://www. airlines. org/Pages/Government-Imposed-Taxes-on-Air-Transportation. aspx

Trade Unions

Trade Unions are a great accomplishment conquered by the working class within the last two generations but a sometimes, unpredictable risk for companies. If not completed carefully, working course market leaders, especially in european countries where concepts of democracy keep, can seriously ruin a company performance. Companies need to engage into a well balanced marriage with them in order to avoid sudden stoppages of the services, which can result in serious profit loss. For instance in 1985, United Airlines experienced a 29 times long punch which led to huge losses in revenues. The business negotiators could actually restore the company normal functioning only after multiple discussions and trade-offs with the personnel' representatives. This of course could have been prevented with a proactive behavior, ensuring working conditions were maximum, or moving the company to a country where trade unions are much easier to manipulate. Wars and changes in international relationships

For companies working outside their countrywide edges, good and secure interactions between countries are crucial. A battle or a diplomatic misunderstanding can turn into a required leave from some market segments or in a lack of revenue. Before making a decision to use in a certain foreign country, a company should deeply review the on-going marriage with its authorities. Moreover, after they decide to be in business with this hypothetical country, they must be ready to react to any possible event changing the national political situation. This may turn extremely essential for companies working in unpredictable countries like Southern American, or Eastern Europe. For instance, with the recent outbreak of a significant protest in Venezuela, potential airlines passengers may think twice before deciding to travel there. This change in public areas opinion has for certain reduced the income of several companies, including United Airlines, which provides flights from the united states to the capital city, Caracas.

Economic factors and their effect on business economics

By Sybren Dijkstra

The economic factors constitute an extremely important stage of strategy development for business economics, since financial factors have direct impact on the potential attractiveness of various business ventures. It is highly likely that the economical factor will have a considerable effect on business economics, nonetheless it is very hard for taking all the variables into account. A primary reactive approach is known as wise when it comes to the economy. Multiple variables, which cover a sizable area of the overall economy will be reviewed in this section in order to check the hypothesis: personal prosperity, competition and governments.

The ramifications of changes in personal wealth can have a considerable effect on business economics internationally. Personal wealth is a blend of multiple variables, such as GDP per capita progress, interest rates, inflation rate, unemployment rates, fiscal insurance policy, and monetary policy. Personal riches can therefore be utilized as a proxy for the overall economy. For example, when the interest levels rise people will safe their money and this affects to which extent people are prepared to consume. When you compare the quantity of passengers taken (shape 1) and the planet GDP per capita (figure 2) they seem to be to be correlated. The image is confirmed by the income stream in number 3. The hypothesis that a decrease in personal wealth straight affects earnings, hence business economics

An similarly important part of the economic examination is identifying potential competitors and ascertaining strengths, weaknesses, opportunities, hazards, and possible strategies. Knowing your competition, remains to be one of the key factors to success. Weaknesses of opponents can signify external opportunities, while major competitive advantages can pose key external threats. The more competitive information is gathered, the easier it becomes to outsmart your competition. Virgin Atlantic proven this point. It had a marketing budget less than another of what English Airways possessed for marketing, due to concentrated advertising and outsmarting your competition Virgin Atlantic was able to publish a profit of 68 million pounds, while British Airways had to survey a 401 pound functioning loss in '09 2009.

Governments form the previous, but evenly, important part of the analysis, since they have the power to execute and alter economic policy. Government authorities create the legislation and frameworks where businesses contend with one another. Every once in awhile the government changes these guidelines and frameworks forcing businesses to improve the way they operate. Business is thus keenly damaged by government insurance policy. The airline industry for example possessed to handle higher landing charges as well as additional taxes enforced on the air-travelling public directly impacting on the income and revenue.

Combining these three factors in the economic assessment in the SLEPT research suggest a verification of the hypothesis mentioned at the start of the section. Personal riches, used a proxy for express of the market, might be directly influencing business economics. Competition and government authorities are also with the capacity of directly impacting on business economics. This shows that the financial factors need a pro-active attitude, since it's essential to stay ahead of competition and that this can only be achieved by staying up to date on the new guidelines and the point out of the overall economy.

Technological factors and business economics

By Ewan Tauran

Technological factors impact business economics in a wide variety of ways. They play a solid role in the external environment of a company and really should be carefully evaluated. Technological progress can reduce costs, improve quality and business lead to advancement. These innovations generally gain both companies and consumers. However, the effects of technological progress can be very diverse. Failing woefully to keep up with technological fads can cause serious economical damage. The examination of technological factors is vital for high-tech market sectors such as the flight industry.

The constant development of technology caters to the growing need of companies to meet issues of sustainability and security. As mentioned earlier, there are significantly strict legal rules about the materials that need to go into aircraft construction in order to make them safer and more resistant to fire hazards. The rules regarding emission and local climate results are also becoming more and more strict. Due to technological progress, airline industries can take up newly developed technologies and conform to these new laws and regulations and regulations. As mentioned before, airline companies also come across another concern; that of increased safety needs and needs by consumers caused by the terrorist attacks of 9/11. [ET1] In this specific case, adopting new air transport security technology can help air travel industries talk about these safeness issues.

Though[ET2] it is the case that the airline industry employs technology thoroughly in its functions, they rely on aircraft makers such as Boeing and Airbus for his or her aircraft. With respect to aircraft technology, flight industries are limited to these aircraft manufacturers. Therefore it is important for companies to take benefit of technological advancement in other elements of their operations. A good example could be to employ more advanced technology in the front office of any airline industry. This can improve customer support which can lead to an increase in ticket sales and therefore overall earnings. Another factor that should be considered by organizations is technological progression regarding social media. Presently, social media is becoming ever more important to firms around the globe as a highly effective marketing tool. Air travel industries should realize this and adjust to the changing circumstances regarding this global craze.

Technological improvements do not always have positive effects on business economics. For example, technological progress regarding 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, therefore making the need for flights obsolete. Those who live far aside geographically no more have to go to each other bodily when the chance to communicate digitally presents itself as a good low-cost substitute.

Due to the fast development of technology, organizations should stay concentrated and conform quickly to be able to survive in an increasingly competitive economic climate. At the moment, technology progresses so fast that it is becoming more and more hard for businesses to promptly modify. Firms who fail to adapt can miss out on all the potential results from technological growth and as a result lose market share[ET3].


When taking all the SLEPT research factors into account, they appear to suggest that every single factors should be studied into consideration and that every factor requires a pro-active approach. Firstly, the social part of the analysis demonstrates that each and every single one of the factors has a significant of effect on business-economics. They are also needed for the success of businesses because the lives of customers revolve around these factors. An enterprise should adapt its strategy proactively to these factors in order to increase its revenue and market share. Secondly, the research done on politics and legal factors also shows that these factors need a pro-active frame of mind towards these factors. Finally, the economic evaluation suggests that the economical factors need a pro-active frame of mind, since it's essential to stay before competition and that this can only be done by staying up to date on the new plans and the express of the market. And lastly the technological part of the analysis suggests that because of the speedy development of technology, businesses should stay targeted and modify quickly in order to survive within an increasingly competitive economic climate. At this time, technology advances so fast that it is becoming increasingly hard for businesses to promptly adapt. Firms who neglect to adapt can miss out on every one of the potential results from technological advancement and as a consequence lose market share[ET4].

However the research for this report will not cover all sectors, just the airline industry was used as an example, also the price of maintaining each one of these factors would be astronomical. To come up with a more definitive bottom line more research is necessary.


IATA. (2014). Reality SHEET: Industry Information. Available: http://www. iata. org/pressroom/facts_figures/fact_sheets/Documents/industry-facts. pdf. Last accessed 30 Apr 2014.

Indexmundi. (2011). GDP - per capita (PPP) (US$). Available: http://www. indexmundi. com/g/g. aspx?v=67&c=xx&l=en. Last accessed 30 April 2014.


[1] http://www. intersperience. com/images/Virgin Atlantic Case Study. pdf

[2] http://seekingalpha. com/article/120335-domestic-air-travel-lowest-since-postminus-9-11

[ET1]I need to improve this phrase.

[ET2]Paragraph is lacking a proper theme sentence

[ET3]Conclusion needs more body

[ET4]Conclusion needs more body

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