Environmental constraints are any limitations on strategy options due to political, external, competition, social requirements and expectations, cultural or economic factors, technological or legal requirements. A business activity may be constrained (limited) by the environment in which it operates. Businesses need to be constantly conscious of these environmental constraints and how they change with time.
Businesses are the most affected by a host of factors regarded as environmental constraints. Legal constraints, for instance, determine how to produce in terms of health and safety, and product safety laws.
There are also laws regarding pollution and emissions in the environment. Political constraints will affect the taxing system. Acceptance of genetically modified organisms highly depends on political will of a given country.
Social constraints influence the tastes and buying patterns. For instance, consumers have in the recent past increasingly turned to healthy foods in place of those heavily saturated with fats and high sugar levels. Economic factors such as household income determine what the consumers generally have to spend and what to buy.
Social requirements include the society’s expectations from the business, such as ethical issues. Technological constraints determine what the business is able to produce and sell and the mode of operations. Competition from other service or product providers and their actions influence the strategies that are adopted by a business. Analyzing and understanding environmental constraints and their dynamics are fundamental for businesses to plan ahead.