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Questions and Answers
Which of the following is NOT one of the demographic forces mentioned in the text?
What type of government is described as a 'military government' in the text?
Which of the following is essential for mitigating legal risks and maintaining consumer trust?
What type of computing technology is mentioned in the text as being essential for supporting the growing demands of digital businesses?
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Which of the following is NOT mentioned as a natural environment force in the text?
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What is essential for mitigating legal risks and maintaining consumer trust?
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Which of the following is NOT mentioned as a type of technological infrastructure investment essential for supporting the growing demands of digital businesses?
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What is the primary purpose of a military government according to the text?
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Which of the following is NOT mentioned as a type of demographic force in the text?
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What is the primary purpose of investments in technological infrastructure according to the text?
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Study Notes
External Forces
- External forces can be divided into 5 broad categories: economic, social, cultural, demographic, natural environment, political, governmental, legal, technological, and competitive forces.
Economic Forces
- Inflation is an increase in the overall price level of goods and services, measured as a percentage.
- Interest rates are the prices that people and businesses pay for borrowing money.
- Opportunity costs are the value of the next best alternative when a decision is made.
- Supply and demand are the two competitive forces that affect pricing strategies.
Social Forces
- Social forces encompass the attitudes, beliefs, lifestyles, and behaviors of individuals and groups within society.
Cultural Forces
- Cultural forces refer to the norms, customs, traditions, and values prevalent in a society.
Demographic Forces
- Demographic factors like population size, age distribution, income levels, and educational attainment directly affect a business's customer base.
Environmental Forces
- Environmental concerns are a growing force, influencing regulations, consumer preferences, and resource availability.
Political Forces
- Political factors include the external constraints linked to governmental activities and political conditions that affect a business' area of operation.
Governmental Forces
- A military government is a form of government that is administered by military forces, whether or not this government is legal under the laws of the jurisdiction at issue.
Legal Forces
- Regulatory compliance, such as complying with data privacy laws, is essential for mitigating legal risks and maintaining consumer trust.
Technological Forces
- Investments in technological infrastructure, including cloud computing, edge computing, and 5G networks, are essential for supporting the growing demands of digital businesses.
Competitive Forces
- Competitive forces include the pressures from rival companies and the threat of new entrants in the market.
External Factor Evaluation (EFE) Matrix
- The EFE matrix is a strategic management tool used to assess current business conditions.
- It involves gathering a list of external factors, dividing them into opportunities and threats, assigning weights, and rating each factor.
- The same process is used to create the IFE matrix.
Competitive Profile Matrix
- The Competitive Profile Matrix is a tool used to analyze competitors and identify opportunities and threats.
Cybersecurity
- Businesses are constantly under siege from malicious actors seeking to exploit vulnerabilities in their systems.
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Description
Learn about the five broad categories of external forces that influence an economy, and understand the importance of performing an external audit involving managers and employees. Explore how economic, social, cultural, demographic, natural environment, political, governmental, legal, and technological forces impact businesses.
